Economic growth likely picked up in the third quarter despite global volatility, with increased government spending offsetting weakness in exports and the agricultural sector, a private think tank report said on Monday.
“While the global economy groaned with the Greek crisis and [with the]China stock market meltdown and economic slowdown, the Philippine economy showed signs of doing better in the third quarter,” investment bank First Metro Investments Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said in their latest joint issue of The Market Call.
Gross domestic product (GDP) growth as of the first half this year stood at only 5.3 percent, falling short of the government’s 7 percent to 8 percent target for this year.
However, the FMIC-UA&P report said: “While El Niño may have hit agriculture in the latter part of the [third]quarter and exports continue[d]to drop slightly in July and August, the expansion in infrastructure spending for the two months would offset these as we estimate it to have jumped by more than 50 percent.”
The second quarter saw growth improve to 5.6 percent from 5 percent in the first three months of the year.
Official third-quarter GDP growth data will be released later this month. The government has admitted that the full-year goal is likely to be missed, with officials offering a 6 percent forecast. The team did not provide a third-quarter outlook, but had forecast full-year growth of 6.2 percent.
It noted that the government ramped up spending in July and August, with expenditures growth, excluding interest payments, hitting 31 percent and 21.4 percent, respectively.
Disbursements were said to have demonstrated the government’s commitment to ramp up spending, bolstered by infrastructure and capital outlays that surged by 93 percent year-on-year in July.
“We expect national government spending to sustain its double-digit growth pace into the coming months due to the upcoming elections, heavy infrastructure spending and lower inflation,” FMIC and the UA&P said.
They also noted improvements in industrial output, which rose 3.7 percent in August and was boosted by strong growth in electronics exports.
“We expect further improvements for the rest of the year,” the report added.
Consumer spending, which remained fairly muted in the first half, was said to have appeared ready to expand in the third quarter as government spending rose and falling inflation boosted real income.
The rise in consumer prices likely continued its downward trend in the third quarter, averaging below 1 percent, on the back of low oil prices and stable to falling food prices.
“We expect a non-threatening rebound in the fourth quarter, but full-year average should be well below the Bangko Sentral ng Pilipinas’ 2 percent to 4 percent target range,” FMIC and the UA&P said in the report.
Exports, meanwhile, likely remained challenged as US growth in the third quarter appeared unexciting while China’s industrial output sputtered as well.
“However, we expect a good bounce back in these two economies in the fourth quarter,” they noted.