While the economists of a particular university predict slower economic growth for the Philippines this year, the University of Asia and the Pacific (UA&P) see the national economy growing stronger in the 2nd half of this year, according to a news report by BusinessWorld.
To put things in perspective, posted below is an excerpt from the BusinessWorld report. Some parts in boldface…
THE PHILIPPINE ECONOMY could grow by around 5% in the second half of the year, driven by base effects and an expected acceleration in government infrastructure spending, according to the University of Asia and the Pacific (UA&P).
“Growth could recover to around 5% in the second half on base effects and a ramp-up in National Government infrastructure spending,” UA&P said in its The Market Call report this month.
Government officials earlier signaled a pickup in disbursements and project implementation as agencies roll out catch-up programs.
UA&P cautioned, however, that growth will remain subdued in the first half amid unresolved issues surrounding last year’s flood control scandal and elevated oil prices.
“Weak gross domestic product growth and faster inflation will weigh on the economy in the first half amid the unresolved flood control scandal and high oil prices from the Middle East conflict,” it said.
“Flip-flopping US-Iran talks may keep fuel prices elevated, hitting the Philippines harder than its ASEAN (Association of Southeast Asian Nations) peers,” it added.
The Philippine economy expanded by a slower-than-expected 2.8% in the first quarter. This was below the government’s target range of 5-6% for the year.
For the entire year of 2026, UA&P said growth will be slow “but pose some resilience in the face of near-term global and local headwinds that will likely moderate activity in the first half of the year.”
“While cautious business sentiment and lingering geopolitical uncertainties may weigh on household and investment spending, the domestic economy continues to benefit from strong structural drivers such as steady household consumption, a healthy labor market, and sustained remittance inflows,” it added.
Meanwhile, UA&P said that it expects inflation to accelerate further amid second-round effects from the oil shock, “but likely not to (reach) double digits year on year.”
Inflation accelerated to 7.2% in April, marking the second consecutive month that it settled above the Bangko Sentral ng Pilipinas’ (BSP) 2%-4% target. It also breached the BSP’s 5.6%-6.4% forecast for the month.
“The BSP took on a more hawkish tone because of above-estimate inflation, raising rates and its inflation forecast to 6.3% for 2026,” it said.
“We likewise see above-target inflation for the rest of 2026, with the possibility of double-digit inflation rates due to base and second-round effects creeping into succeeding readings,” it added.
As inflation is expected to settle above the target for the rest of the year, UA&P expects the BSP to further tighten.
“Our outlook pencils in 75 basis points (bps) more of rate hikes for this year, bringing the policy rate to 5.25%, especially as the April inflation reading trumped even the BSP’s upper inflation bound,” it said.
The central bank last month raised rates for the first time in nearly two years by 25 bps to 4.5%, with BSP Governor Eli M. Remolona, Jr. saying the Monetary Board remains open to extending the tightening cycle to anchor inflation expectations.
NO STAGFLATION – Despite weaker growth and high inflation, UA&P said the country is not experiencing stagflation.
“Despite inflation negative commentary from some analysts, the Philippine economy is not in stagflation mode,” it said.
“Inflation, while elevated, will continually trek downwards after a peace deal gets signed, and growth will return when infrastructure spending resumes along with consumer and business confidence,” it added.
Meanwhile, the peso remains under pressure as crude oil prices surge.
“The peso-dollar rate remained under pressure amid the rebound in crude oil prices (i.e., close to $100/barrel for West Texas Intermediate, and $110/barrel for Brent) in April,” it said.
On Tuesday, the local currency closed P61.56 versus the greenback, weakening by 9.5 centavos from its P61.465 finish on Monday.
UA&P said it expects bonds with longer tenors to deliver higher returns amid elevated interest rates, after investors cautiously returned to the local bond market in April.
Let me end this post by asking you readers: What is your reaction to this recent development? Do you think the economy of the Philippines will truly rebound in the 2nd half of this year? What do you think will help boost the national economy apart from foreign investments?
You may answer in the comments below. If you prefer to answer privately, you may do so by sending me a direct message online.
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