ING Bank Manila said the Philippine economy likely grew at a slower pace in the first quarter of 2017 on the back of lower government spending.
ING estimates growth in gross domestic product (GDP) at between 6 percent and 6.3 percent, compared with a 6.8 percent expansion a year earlier and a 6.6 percent rise in the last quarter of 2016.
Official GDP results for the first three months of the year will be released on May 18. The government expects the economy to have grown between 6.5 percent and 7.5 percent.
“The disconcerting news is that headline and core government spending growth is slow and is likely to affect overall first-quarter GDP growth,” ING Bank senior economist Joey Cuyegkeng said in a report on Thursday.
The Bureau of the Treasury on Wednesday reported government spending totaled P241.7 billion in the first quarter of 2017, up 4.1 percent from P232.2 billion a year earlier.
Cuyegkeng noted 4.1 percent year-on-year was slower compared with 23.2 percent growth in the comparable period last year, and with 11.2 percent in the first quarter of 2015 and 13.9 percent January to March 2014.
Fiscal spending in March would have been closer to 40 percent year-on-year if the first quarter and core and headline spending had been brought around the same pace as in the same period in 2016, he pointed out.
A stronger than expected first-quarter 2017 economic growth would require stronger private sector activity and for exports to continue rebounding and agriculture recovers from the impact of drought in the first half of 2016.
Cuyegkeng noted that exports grew by 17.5 percent on average in the first two months of the year, from a contraction of almost 8 percent a year earlier. With imports growing by 15.8 percent and the trade gap widening to $4.2 billion from $3.7 billion a year earlier, the rebound in exports would have been wiped out.
On agriculture, he said real growth of 4 percent in first quarter is expected but the drop in spending from a high base last year due to the elections may also temper the impact of a rebound in agriculture.
“Meralco power sales in first-quarter 2017 were around 3 percent, compared [with]12 percent in first-quarter 2016. A more detailed power consumption data by sector would be more important. Monetary indicators show more promise in financing faster economic activity in the first quarter,” the analyst said.
ING expects improvements in government spending in the coming months, “otherwise it may mean more moderate 2017 growth than the market consensus view,” he added.