AUGUST 30, 2018 - ‘TEPID’ Q3 GROWTH SEEN ON PRICES, WEAK EXPORTS
HIGH commodity prices and weak export earnings are expected to keep the country’s third-quarter economic performance weak at 6.5 percent or lower, according to a local think tank. In its latest Market Call report, First Metro Investment Corp. (FMIC)-University of Asia and the Pacific (UA&P) Capital Market Research said inflation is expected to peak in August at 5.9 percent. The think tank also said the country’s export performance will recover sometime in the second half of the year and not immediately in the third quarter. Inflation is expected to peak in August, the think tank said, because of the heavy rains and flooding that occurred due to the monsoon. However, the think tank said the increase in commodity prices will slow down because of rice harvests and the arrival of rice imports in September. It added that oil prices are expected to trade below $70 per barrel. Electricity rates are also expected to go down because many hydropower plants will operate at full capacity during the rainy season. The think tank also said the decision of the Monetary Board to raise interest rates by 50 basis points to 4 percent could help temper inflation. Research said exports growth will turn positive in the second semester, since there is a six-month lag between peso depreciation and improvement in exports. Earlier this month, Socioeconomic Planning Secretary Ernesto M. Pernia said, in order to attain the target of 7-8 percent GDP growth this year, the economy needs to grow by 7.7 percent in the second semester. In the second quarter, the Philippine economy only grew 6 percent, slower than the 6.6 percent posted in the first quarter this year and second quarter last year. In the January-to-June period, GDP averaged 6.3 percent, lower than the 6.6 percent recorded in the same period in 2017. Pernia said the country’s growth in the second quarter was adversely affected by the slowdown in the agriculture sector. The growth of the Agriculture, Fishery and Forestry sector only posted a growth of 0.2 percent. He said the harvest of palay, corn, sugarcane and mango harvests for the quarter “were dismal.” Pernia added that coconut, including copra, livestock and poultry production, also reported weak output.