Thailand
Philippines: ‘Lower inflation, spending pickup to boost Q4 growth’
MANILA, Philippines — Easing inflation, declining interest rates, as well as the expected recovery in public spending are seen to boost the country’s economic growth in the fourth quarter of the year, the Department of Finance (DOF) said over the weekend.
In his latest economic bulletin, Finance Undersecretary and chief economist Gil Beltran said economic growth in the fourth quarter will be driven by the country’s favorable inflation environment and strong fiscal position.
“The continuing drop in inflation has given economic authorities policy room to loosen liquidity, enabling a cut (in) the policy rate by another 25 basis points. This, plus a strong fiscal position, coupled with efficient implementation of the catch-up spending program, will boost economic growth in the last quarter of the year,” Beltran said.
Inflation continued its downtrend last September, falling to a 40-month low of 0.9 percent. This was slower than the 1.7 percent inflation print in August and 6.7 percent in September last year.
This also brought the average inflation in the first nine months of the year to 2.8 percent, well within the government’s target of between two percent and four percent.
“The deceleration in price is accounted for by both food and non-food items. In particular, rice and vegetable prices continued to drop. Likewise, meat and fish inflation slowed down due to base effects,” Beltran said.
He added that non-food inflation was also tempered down by the decline in electricity rates and the 0.13 percent year-on-year drop in Dubai crude oil price from $62 per barrel in September last year to $53 per barrel.
“For the rest of the year, assuming month-on-month price growth of at most 0.2 percent as in September, monthly inflation will be likely still below one percent in October before making upward corrections in the final two months,” Beltran said.
With an easing inflationary environment, the Monetary Board of the Bangko Sentral ng Pilipinas, during its meeting last Sept. 26, decided to cut policy rates by another 25 bps, making interest rates lower by 75 bps since May this year.
BSP Governor Benjamin Diokno said the Monetary Board believes the benign inflation outlook provides room for a further reduction in policy rate to support economic growth and reinforce market confidence.
Meanwhile, latest data from the Bureau of the Treasury (BTr) showed that government disbursements last August rose by 8.78 percent to P282.23 billion from P259.46 billion in the same period last year.
This brought the government’s total expenditures from January to August 2019 to P2.211 trillion, up 0.9 percent from P2.191 trillion in the same eight-month period in 2018.
Earlier, the Department of Budget and Management (DBM) said government spending is already starting to normalize, after slowing down due to the delay in the passage of the 2019 General Appropriations Act.
Moreover, the DBM said disbursements are expected to pick up as the expenditures of the DPWH and DOTr will be heavily concentrated in the second semester of the year.
Source: https://www.philstar.com/business/2019/10/07/1958042/lower-inflation-spending-pickup-boost-q4-growth#ShK1ftC1pIk7VWbF.99