Strong local demand to support growth in H1 (Sabong News)

Heightened domestic demand is expected to cushion the impact of the Russia-Ukraine conflict on the economy in the first semester of the year, First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said in a joint report. FMIC and UA&P said that while Russian invasion of Ukraine has put a dampener on the domestic inflation outlook, heavy private sector and government spending before the May elections should soften its overall impact on economy, “at least” in the first-half. “The Russian invasion of Ukraine has exacerbated the crude oil and commodity price spiral and will likely bring domestic inflation above the two percent to four percent target of the BSP [Bangko Sentral ng Pilipinas],” FMIC and UA&P said in the March issue of the Market Call. “However, its impact on the economy will likely turn out mild amidst heavy election spending in H1 [first-half] and growing business confidence and robust earnings,” the report added. As businesses and workers anticipated the relaxation of Covid-19-related restrictions in late February, FMIC and UA&P also noted that manufacturing index jumped to 52.8 in the same month from 50.0 in January, representing a 26-month high. Optimism was building up in the manufacturing sector, FMIC and UA&P pointed out. Moreover, the report said that imports of capital goods had a good start for 2022, expanding by 16.8 percent from 13.1 percent in December, the ninth consecutive month of annual gains. “This suggests improving business confidence,” FMIC and UA&P said. In addition, inflation eased further to three-percent in February, similar to the pace a month earlier. “While these will likely succumb to the staggering spiral of crude oil and commodity prices, this early slowdown may soften the expected impact of fuel prices in the wake of the Russian-Ukraine conflict,” the joint report stated. Meanwhile, government spending paused in December as state agencies prepared for expenditures to carry over to 2022 in the light of newly implemented cash-based budget system. “We expect a markedly faster pace of spending in H1-2022 as the May elections draw ever closer,” FMIC and UA&P said. Last March 15, Socioeconomic Planning Secretary Karl Kendrick T. Chua said the Philippines was still on track to hit its 2019 economic output level in the first three-months of the year despite geopolitical crisis. Likewise, the Development Budget Coordination Committee (DBCC), an inter-agency body that sets the country’s macroeconomic targets, maintained that the economy would grow by seven percent to nine percent this year.