Q2 GDP growth seen at 5.8-6.8%

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Mixed views on factors such as exports and consumption have led to a wide range of forecasts regarding second quarter economic growth, results for which will be released by the government later this week.

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Analysts polled by The Manila Times offered gross domestic product (GDP) growth estimates ranging from 5.8 percent to 6.8 percent with an average of 6.4 percent, which would mean an April-June result unchanged from the previous quarter.

This would place year to date growth below the government’s 6.5 to 7.5 percent target and would also be a slowdown from the 7 percent recorded in the second quarter of 2016.

GDP growth last year was 6.9 percent, near the top end of the 6-7 percent goal.

Socioeconomic Planning Secretary Ernesto Pernia last week expressed confidence that the economy picked up in the second quarter, with 7 percent “still possible”.

Official second quarter GDP data is scheduled for release by the Philippine Statistics Authority (PSA) this Thursday, August 17.

Most upbeat
Moody’s Analytics was the most optimistic in The Manila Times poll, saying that rising exports would have boosted GDP growth to 6.8 percent.

Based on latest PSA data, exports grew by 0.8% to $4.91 billion in June from a year earlier, with electronics – the Philippines’ top export – up 4.4 percent and accounting for over half at $2.62 billion.

“[D]omestic factors have remained conducive to strong growth. Private consumption will grow rapidly for the foreseeable future thanks to rising incomes and favorable demographics. Investment will also expand rapidly as a result of a mixture of private and government projects,” Moody’s Analytics added.

Land Bank of the Philippines market economist Guian Angelo Dumalagan, meanwhile, said the economy likely expanded by 6.7 percent, driven by higher government spending.

Latest Department of Budget and Management data show that in June alone, national government spending was up 23 percent year-on-year to P270.7 billion.

“Among the major sectors, agriculture likely accelerated together with services. Good weather conditions possibly contributed to stronger growth in farm output,” Dumalagan added.

Metropolitan Bank & Trust Co. Research head Marc Bautista offered a 6.5 percent forecast, noting still robust household consumption expenditures, support from strong government spending and better export numbers.

“Base effects from the high growth of second-quarter 2016 is expected to dampen the growth number, however, and we expect full-year GDP to hit around 6.6 percent this year,” he added.

Analysts from IHS Markit, Citigroup and Ateneo de Manila University, meanwhile, estimated second quarter GDP growth to have stayed unchanged at 6.4 percent.

“Private consumption expenditure is estimated to have remained robust, boosted by continued expansion in remittances from workers abroad and rapid expansion in household credit,” IHS Markit Asia-Pacific chief economist Rajiv Biswas said.

Infrastructure spending and housing construction are also expected to have been strong as the Duterte administration implemented plans to ramp up infrastructure and growth in household incomes supported residential property purchases.

“Exports have also shown rapid growth in second-quarter 2017, although the net impact on GDP will be dampened by the buoyant expansion of imports due to the strength of domestic demand,” Biswas said.

“The Philippines economy is also forecast to show continued strong growth of 6.4 percent year-on-year for the 2017 calendar year,” he added.

Citigroup Managing Director and head of Asia Pacific Economic and Market Analysis Johanna Chua did not elaborate on her estimate, while Ateneo economist Alvin Ang also pointed to a pick-up in infrastructure spending.

Slowdown expected
DBS economist Gundy Cahyadi, on the other hand, said the economy likely expanded by only 6.2 percent in the second quarter even as government spending had accelerated.

“From 4 percent in first-quarter 2017 to more than 13 percent in the second quarter. This is likely to be supportive of overall GDP growth,” he said.

However, Cahayadi said that what would be more interesting is how investment growth fared during the period.

“While we continue to see double-digit growth in investments, the moderation in numbers is likely to have continued, partly due to the high base effects,” he said.

The least optimistic estimate came from ANZ Research economist Eugenia Victorino, who said the Philippine economy likely slowed 5.8 percent.

“While exports growth remained supportive of growth, household consumption likely moderated from the election-related bump in 2016. Meanwhile, import growth remained strong even as private investment is becoming more cautious,” she said.

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