Philippines imports likely to grow on higher demand of capital goods

Philippines imports data, due to be released late this week, is expected to rise, indicating continued robust demand. This is primarily due to surge in imports of capital goods during the first quarter of this year, driven by the frontloading of investment ahead of the elections.

Overall import growth is expected to come in at seven percent this year, up from two percent last year. Imports of capital goods grew a record-high 49 percent y/y in the first quarter of 2016. Consumption growth at 6 percent and a double-digit investment growth continue to prop up domestic demand, DBS reported.

The monetary policy meeting of the Bangko Sentral ng Pilipinas (BSP) will give further direction to the nation's growth prospects. The recent policy meetings have been dominated with strong words on growth but a dovish assessment of inflation. The distortion in global crude oil prices has played a dominant role in shaping the central bank’s policy path so far. Meanwhile, the BSP aims to lift rates on its term deposit facility, the report said.

"At this juncture, we still expect that the next rate move from the BSP to be a hike rather than a cut," DBS quoted in a research report.

Meanwhile, the central bank is consistent with its efforts to ensure longer-term growth sustainability. With investment growth still trending in the double-digit territory, there is arguably some room for the BSP to raise rates in the near term.