Economic growth to recover in Q2

By , on July 2, 2014

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MANILA — Despite a frustrating performance in the first quarter, the country’s economic growth is seen to reach recovery in the second quarter.

“While first quarter GDP (gross domestic product) growth was unexpectedly weak, we expect it to improve and move back above 6.5 percent in the remaining quarters of 2014,” Barclays said.

UK-based Barclays said in a report that it sees the country’s economic recovery though inflation pressures are seen to rise and prompt Bangko Sentral ng Pilipinas (BSP) to increase the third quarter’s policy rates.

“We expect growth to bounce back from second quarter onwards, as there are very few signs that the domestic economy is slowing,” the bank said in its Emerging Markets Quarterly report.

“Merchandise exports have also continued to rise, while the service sector expansion remains strong,” the bank added.

The Philippines had its weakest performance in nine quarters during the first quarter this year with the economic growth only at 5.7 percent–attributed to the devastation brought by Typhoon Yolanda.

From the expansion of 7.2 percent recorded last year, Barclays predicted the country’s economy to grow by 6.5 percent this year.

Meanwhile, along with strong domestic demand Barclays warned against the effect of inflationary pressures.

 “Food price inflation has been the key driver of inflation… The recent pickup in food prices has been broad based, and partly due to adverse weather conditions and rising processed food prices,” the bank said.

“The BSP has lowered its target inflation range to two to four percent in 2015, which creates some concerns about the upper bound of the range being breached next year,” Barclays added.