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Strong growth expected in 2nd quarter

Economists expect a sustained economic expansion in the second quarter, on increased spending related to elections and infrastructure projects.

“While the bright outlook for the first quarter appears to be a given, second-quarter performance may not be far behind,” economists of University of Asia and the Pacific and First Metro Investment Corp. said in a joint report.

The economists said in a publication titled Market Call inflation would be likely slightly faster in the second quarter at 1.4 percent, still below the 2-percent to 4-percent target of Bangko Sentral ng Pilipinas. Inflation averaged 1.1 percent in the first quarter.

“This would allow consumers greater leeway to increase spending especially with the additional boost provided by election spending in April and May. And while crude oil prices have bounced back from their lows in January, few really think any major breakaway from the $40/barrel level,” the report said.

It said government spending would likely accelerate in the second quarter, centered on the elections, even as more infrastructure projects continued, while big-ticket PPP projects were beginning to take off.

“Nonetheless, the slow start of the deficit in January means that national government has much room to ratchet up expenditures in the succeeding months,” it said.

Incoming President Rodrigo Duterte earlier disclosed a plan to dramatically raise the salaries of policemen and military personnel.

The economists said if this materialized, government spending would experience a sudden jump upon implementation, and result in higher budget deficit.

The economy expanded 6.9 percent in the first quarter, faster than 5 percent a year ago. It was also higher than the revised 6.5-percent growth in the fourth quarter of 2015.

GDP grew 5.9 percent last year, slower than 6.1 percent in 2014.  The government expects GDP to grow between 6.8 and 7.8 percent this year, anchored mainly on robust domestic demand and increased fiscal expenditures.

Topics: Strong growth , University of Asia and the Pacific , First Metro Investment Corp
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