By Katherine K. Chan
TYPHOONS and the continued corruption scandal involving government flood control projects could have led to slower economic growth within the third quarter, the University of Asia and the Pacific (UA&P) said.
In its latest The Market Call report released on Wednesday, UA&P said Philippine gross domestic product (GDP) likely grew by 5.2% last quarter, below the federal government’s 5.5-6.5% goal.
“We project a GDP slowdown to a 5.2% year-on-year pace in (the third quarter) as a consequence of more weather disturbances and the favored uproar over the flood control controversy,” UA&P Senior Economist Victor A. Abola and economist Marco Antonio Agonia said.
That is slower than the 5.5% expansion recorded within the second quarter but would match the pace recorded in the identical three-month period last yr.
Third-quarter GDP data will likely be released on Nov. 7.
Economy Secretary Arsenio M. Balisacan earlier said growth might soften further within the third quarter as a consequence of typhoon-related disruptions but could still meet the lower end of the federal government’s goal.
Meanwhile, the UA&P economists said economic growth could pick as much as 5.7% within the fourth quarter, which might bring the full-year average to the low end of the federal government’s goal.
Mr. Abola and Mr. Agonia said there are “positive signs of recovery” this quarter as they expect inflation to stay benign and average at just 1.6% within the three-month period, which might support domestic demand.
Headline inflation picked as much as 1.7% in September, faster than the 1.5% clip in August but slower than the 1.9% seen in the identical month last yr. Still, this marked the seventh straight month that the patron price index (CPI) was below the Bangko Sentral ng Pilipinas’ (BSP) 2-4% annual goal.
For the primary nine months, inflation averaged 1.7%, matching the BSP’s full-year forecast.
They added that the employment recovery seen in August also bodes well for growth. The country’s unemployment rate eased to three.9% that month amid increased hiring activity within the agriculture and construction sectors, lower than the three-year high of 5.3% in July and 4% in the identical month a yr ago. Nonetheless, the year-to-date jobless rate was a tad higher at 4.1% from 4% last yr.
“Robust” remittances from overseas Filipino employees could also support consumption, they said, and exports also remain regular despite the tariffs imposed by the US on Philippine goods.
Money remittances rose by 3.2% to $2.977 billion in August, bringing the eight-month tally to $22.909 billion, up by 3.1% yr on yr. Filipinos abroad are expected to send more cash home in the approaching months amid the vacation season.
Meanwhile, the country’s exports climbed by 4.6% in August, slower than the 17.6% growth seen in July but faster than the 0.4% a yr earlier. This led to the narrowest trade gap in six months at $3.54 billion.
MORE RATE CUTS
The UA&P economists also expect further monetary easing until next yr as inflation stays low, which would supply more economic stimulus.
“With its view of ‘benign’ inflation until 2027, BSP will likely cut one other 25 bps (basis points) before the tip of 2025 to bring policy rates to 4.5%,” they said.
“More easing in 2026 should bring policy rates to 4% or lower by end-2026.”
The central bank sees inflation averaging 3.1% in 2026 and a pair of.8% in 2027, well inside its 2-4% goal.
The Monetary Board this month unexpectedly lowered benchmark borrowing costs by 25 bps for a fourth straight meeting, bringing the policy rate to 4.75%. It has now cut rates by a complete of 175 bps since kicking off its easing cycle in August 2024.
BSP Governor Eli M. Remolona, Jr. said one other reduction is feasible at their last meeting this yr on Dec. 11. He added that they might extend their rate cut cycle until next yr as they now see the neutral nominal policy rate to be closer to 4% than their earlier projection of 5% as they see the necessity for a more accommodative stance as governance issues related to the corruption mess have led to softer growth prospects as a consequence of weakening investor sentiment.
Mr. Abola and Mr. Agonia added that lower benchmark rates would also support the Philippine bond market and ease the federal government’s interest payment burden.