Think tank: Improved government spending to boost Q4 GDP

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Improved government spending will drive economic expansion in the fourth quarter and boost 2023 GDP growth, according to a local think tank.

In its latest Market Call report, the First Metro Investment Corporation-University of Asia and the Pacific (FMIC-UA&P) Capital Market Research said, “NG will continue to ramp up spending for the rest of the year. Together with slowing inflation to below 5 percent by November, these should boost GDP expansion specially in (the fourth quarter).”

The local think tank said the recovery in August of some 80 percent of jobs lost in “rain-drenched” July following four consecutive months of job gains in manufacturing has made it “more optimistic” that a net gain in employment will occur between September and November.

It also said sliding international rice prices and lower crude oil futures versus spot prices support its view on inflation.

With this, it said, “We still expect the economy to expand by 5.8 percent in 2023.”

Last month, the local think tank said GDP growth in the third quarter may reach 5 percent to 5.2 percent.

It earlier noted that elevated national government spending in the third quarter should provide the stimulus for the third quarter, as the think tank expects a “strong rebound in employment and consumer spending starting September.”

It added that the industry sector expansion will be “broad-based,” although manufacturing will take the lead.

“The Services sector should see domestic and foreign tourism drive Trade, Transportation and Storage, and Accommodations and Food Services starting September,” the think tank said last month.

The local think tank had noted that spending by the national government would pave the way for a “rebound” in the second half of the year.

Taming inflation, FMIC-UA&P said last month, is key to encouraging more household consumption.

The country’s GDP growth in the second quarter reached 4.3 percent, the slowest in two years.

Part of the reason for the slower economic performance was the government itself, according to National Economic and Development Authority Secretary Arsenio M. Balisacan. He said in a budget hearing that if only the spending targets of the government were met, GDP in the second quarter could have reached 5.6 percent.