Economy likely expanded by 7.1% in first quarter

THE ECONOMY likely expanded by 7.1% in the first quarter, as consumption may have gotten a boost from higher remittances and personal income tax cuts, First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said.

“We expect a solid 7.1% GDP (gross domestic product) growth in the first quarter, buoyed further by personal income tax cuts and robust overseas Filipino workers (OFW) remittances…this should prove sufficient to boost business and consumer confidence moving forward,” FMIC and UA&P said in its Market Call on Monday.

The government set its growth target at 6-7% this year, slower than the 7.6% expansion seen in 2022.

Under the Tax Reform for Acceleration and Inclusion law, personal income tax cuts took effect this year. Taxpayers with annual taxable income above PHP 250,000 but less than PHP 8 million have lower tax rates ranging from 15% to 30%.

Cash remittances rose by 3.5% to USD 2.76 billion in January. The central bank expects remittances to grow by 4% this year.

“We expect National Government infrastructure spending, together with major ongoing public-private partnerships, to bulk up in 2023,” FMIC and UA&P said.

The government is planning to spend 5-6% of GDP on infrastructure this year.

“The employment picture should improve starting February when the weather permits more travel, eating out, and construction work,” it said.

At the same time, FMIC and UA&P said that inflation likely peaked in January and should slow in the coming months “though not as fast as policy makers would want.”

Inflation slowed to 8.6% in February from the 14-year high of 8.7% in January.

“Despite high inflation and negativity that troubles many minds, we think the economy is far from being down and out,” FMIC and UA&P said. — L.M.J.C. Jocson