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PHILIPPINE ECONOMIC GROWTH is anticipated to have accelerated in the second quarter, bolstered by steady inflation and <\/span>enhanced labor market conditions, the University of Asia and the Pacific <\/span>(UA&P) reported.<\/p>\n In its recent The Market Call published on Monday, UA&P stated that economic indicators have become \u201cslightly more favorable,\u201d forecasting a gross domestic product (GDP) growth of 5.6% in the second quarter, up from 5.4% in the first quarter.<\/p>\n Compared to the previous year, this would be slower than the 6.5% recorded in the second quarter of 2024.<\/p>\n It would also fall short of the government\u2019s target range of 6-8% for this year.<\/span><\/p>\n \u201cWith below floor (2%) year-on-year inflation from March to May, an increase in infrastructure spending, and greater employment, consumers should be positioned to spend more,\u201d it mentioned.<\/p>\n Inflation declined to a more than five-year low of 1.3% in May, as utility expenses increased at a slower rate. This brought the five-month average to 1.9%, slightly below the Bangko Sentral ng Pilipinas\u2019 (BSP) 2-4% target band.<\/p>\n Data from the Philippine Statistics Authority indicated about 650,000 new positions were generated in April, raising the number of employed Filipinos to 48.67 million. Nevertheless, the unemployment rate rose to 4.1% in April from 3.9% in April 2024.<\/p>\n UA&P highlighted that consumer expenditure likely improved in the second quarter despite a negative consumer sentiment.<\/p>\n The latest BSP Consumer Expectations Survey revealed that Filipino consumers grew pessimistic for the second quarter but maintained a hopeful outlook for the upcoming 12 months.<\/p>\n UA&P stated that ongoing infrastructure projects likely boosted spending by the National Government in May. <\/span><\/p>\n \u201cThe external environment exhibited signs of slight improvement and should not hinder the expansion of domestic demand,\u201d it added.<\/p>\n FURTHER EASING \u201cAnother BSP cut is probable in Q3 if crude oil prices are proven to be temporary or stable,\u201d it stated.<\/p>\n Last week, the Monetary Board lowered the target reverse repurchase rate by 25 bps to 5.25% from 5.5%, amid a moderating inflation forecast and subdued growth.<\/p>\n UA&P indicated that the US Federal Reserve might postpone its own interest rate reductions until later this year.<\/p>\n \u201cWe foresee peso depreciation as the BSP\u2019s and Fed\u2019s policy rate decisions diverge, along with the escalating Israel-Iran conflict,\u201d it remarked.<\/p>\n BSP Governor Eli M. Remolona, Jr. previously indicated that a rate reduction in August was a possibility depending on forthcoming data and further escalation in the Middle East tensions.<\/p>\n Meanwhile, GlobalSource Partners Country Analyst Diwa C. Guinigundo expressed that the BSP was \u201cwell-justified\u201d in its decision to reduce rates as inflation continues to decelerate.<\/p>\n \u201cIts choice to cut the policy rate for the second time not only illustrated its ample monetary flexibility but also its belief that risks have yet to materialize,\u201d he stated in a report dated June 23.<\/p>\n He also remarked that the weaker-than-anticipated growth in the first quarter \u201cmight be bolstered by a dovish monetary policy.\u201d<\/p>\n \u201cWith its agile performance in terms of assessment and suitable action, the BSP is expected to implement another rate cut in the latter half of 2025, subject to actual data,\u201d he added.<\/p>\n Mr. Guinigundo also pointed out that the potential effects of rising oil prices ignited by the intensifying conflict in the Middle East were \u201ctoo significant to overlook.\u201d<\/p>\n \u201cAnother factor to consider is what may transpire with the differential between the BSP\u2019s policy rate and the US Fed Funds rate. Current dynamics appear to indicate that if the differential falls below a hundred basis points, some capital outflow could occur, leading to a depreciation of the peso,\u201d he mentioned. \u2014 Aubrey Rose A. Inosante <\/b><\/p>\n
\n<\/b>UA&P anticipates the BSP will implement another 25-basis-point (bp) interest rate reduction in the third quarter.<\/span><\/p>\n