The Philippine economy is expected to have slowed further in the second quarter, with gross domestic product (GDP) growth likely easing to 2.6% due to elevated inflation and weaker domestic demand.
The economy is showing early signs of recovery momentum, but the outlook remains constrained by elevated inflation and weaker domestic demand, according to the latest economic report.
Against this backdrop, the estimated second-quarter GDP growth of 2.6% would be slower than the 5.44% expansion recorded in the second quarter of last year and the 2.8% growth in the first quarter of this year.
Headline inflation quickened to 6.8% in May, easing from the 7.2% in April but still above the central bank's tolerance band.
The central bank is expected to remain on a tightening path, with an additional 50 basis points of rate hikes likely to be introduced in the near term to rein in inflation.
Manufacturing activity and industrial output have continued to improve, alongside a steady labor market, but external demand and investment remain cautious.
Despite this, the economy is expected to support job creation, particularly in services and construction, driven by steady household consumption and revamped infrastructure implementation.
However, labor market conditions are likely to remain stable rather than accelerate significantly in the near term, due to global economic uncertainty and softer domestic growth.
The peso is likely to remain in the P61-per-dollar range in the near term, sustained by sticky domestic inflation, a still-wide trade deficit, and a more hawkish Federal Reserve.
Further peso depreciation could be tempered if global oil prices continue to soften, easing pressure on the country's import bill and inflation expectations.
