Lower inflation seen boosting Q2 growth

PHILIPPINE economic growth could edge up to 5.6 percent in the second quarter (Q2), the University of Asia and the Pacific (UA&P) said, driven by lower inflation and increased consumer spending.

The projected expansion, which if realized will improve from the first quarter’s 5.4 percent, remains below the government’s 6.0- to 8.0-percent goal for this year.

The January-March figure remains preliminary and could be adjusted just before second-quarter data is released on Aug. 7.

A revision to the economic growth target could be announced this Thursday, meanwhile, with the interagency Development Budget Coordination Committee (DBCC) having met on Monday.

A press briefing has been scheduled for Thursday.

Economic managers have said that the upper end was likely out of reach in the wake of unilateral tariffs imposed by US President Donald Trump, but added that hitting 6.0 percent remained doable.

The Philippines has missed its gross domestic product (GDP) growth targets for the last two years, with the expansion having hit 5.7 percent in 2024 and 5.5 percent in 2023.

The UA&P, in its latest Market Call report, said below-floor inflation from March to May would likely push second-quarter GDP growth higher, with higher employment also enabling consumers to spend more.

“The external sector has improved and would have a limited drag on domestic demand,” it added.

Consumer price growth has slipped below the 2.0- to 4.0-percent target in the last three months, allowing the Bangko Sentral ng Pilipinas (BSP) to again cut its benchmark rate by another 25 basis points (bps) last Thursday.

Monetary authorities also slashed their 2025 inflation forecast to 1.6 percent from 2.4 percent, but raised those for 2026 and 2027 to 3.4 percent and 3.3 percent, respectively, from 3.3 percent and 3.2 percent.

The UA&P expects the BSP to implement another 25-bp cut in the third quarter, which it said would “benefit both bond and equities markets.”

Government spending, meanwhile, is expected to accelerate due to ongoing infrastructure projects, further buoying economic growth.

The country’s growth targets were last revised in December when the DBCC narrowed the 2024 goal to 6.0-6.5 percent from 6.0-7.0 percent and also revised that for this year to 6.0-8.0 percent from 6.5-7.5 percent.

The interagency body, which reviews and approves the government’s macroeconomic goals, revenue projections, borrowing level and spending priorities, again met in May following a Cabinet shake-up.

No announcements were made at that time and officials said that discussions remained ongoing.