ING: Fiscal strength to sustain Philippine growth

MANILA, Philippines — The Philippines needs a strong fiscal performance to keep the pace of the country’s economic expansion similar to that in the second quarter, according to Dutch financial giant ING Bank.

“A strong fiscal performance is needed to keep gross domestic product growth at around 6.5 percent in the third quarter,” ING Bank Manila chief economist Joey Cuyegkeng said in a report.

“August did not disappoint but the acceleration in spending was milder than we expected,” Cuyegkeng said.

The economy grew 6.5 percent in the second quarter, lower than the 7.1-percent growth posted in the same period last year, but slightly faster than the 6.4 percent in the first quarter.

According to the ING report, July to August average headline and core spending growth rates were both at 12 percent, faster than the pace in 2016 which was seven percent for headline spending and 11 percent for core spending.

“We had anticipated close to 20 percent year-on-year growth in August spending. We believe that the lower than anticipated performance may have to do with some accounting and booking delays. The improvement should help overall economic growth to remain close to 6.5 percent in the third quarter despite manufacturing growth indicators posting some moderation,” Cuyegkeng said.

Cuyegkeng said August’s fiscal surplus may have something to do with not just improvement in collections, but also with one-off revenue gains likely to be related to tax settlement inflows.