Q3 GDP growth seen at 6.3-6.6%

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Economic growth likely picked up a bit in the third quarter but factors such as lower government spending could have capped the expansion or even led to a slowdown.

A Manila Times poll of analysts resulted in a tight forecast range of 6.3 percent to 6.6 percent for July-September gross domestic product (GDP) growth. The median of 6.55 percent is marginally better than the second quarter result of 6.5 percent.

GDP growth a year earlier was 7 percent. The economy had expanded by 6.4 percent as of the first half of 2017, below the government’s 6.5 to 7.5 percent target.

Earlier this month, Socioeconomic Planning Secretary Ernesto Pernia expressed confidence that the economy picked up in the third quarter.

Official third quarter GDP data will be released by the Philippine Statistics Authority (PSA) this Thursday, November 16.

Uptick expected
Analysts from Moody’s Analytics, Metropolitan Bank & Trust Co. (Metrobank) Research, and ING Bank Manila were the most optimistic, saying that domestic demand would have boosted growth to 6.6 percent.

“Domestic demand likely remained firm, as consumers benefited from steady inflows of overseas worker remittances and a healthy job market, and investment stayed firm on the back of government-led infrastructure projects,” Moody’s Analytics said.

It added that nonresidential construction permits had increased by 16.8 percent in the first half of 2017 after a 7.8-percent rise in the same period last year.

“Exports also likely boosted GDP growth, as demand for semiconductors and electronics was firm during the quarter,” the firm said.

Latest data show that personal remittances reached $2.56 billion in July and rose further to $2.8 billion in August.

Exports, meanwhile, grew by 10.4 percent to $5.28 billion in July. August saw growth ease to 9.3 percent to $5.51 billion.

Metrobank Research head Marc Bautista, meanwhile, cited continued government spending, robust household consumption expenditures and a pick-up in exports as reasons for his 6.6 percent forecast.

“This is despite the continuing demand for imports attributable to strong domestic consumption spending and capacity building by the government,” he added.

Government disbursements for the third quarter this year reached P683.7 billion, up by nearly P45 billion or 7 percent from the comparable 2016 period.

ING Bank Manila senior economist Joey Cuyegkeng, meanwhile, also said exports, loans and remittances had accelerated from last year.

He noted, however, “some third 2017 weakness with slower manufacturing growth (although fourth recovery is likely given the recent October indicator) and headline and core government spending due to base effects and likely possible underperformance.”

No change
Meanwhile, analysts from HSBC, Land Bank of the Philippines, and First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said third quarter GDP growth likely stayed unchanged at 6.5 percent.

HSBC economist Noelan Arbis said strong private consumption and investments were expected to have sustained the expansion.

“However, data also show that government expenditure appears to have slowed from [the]second quarter, which could indicate lower public investments,” he noted.

“We expect this to accelerate in the future, as the government’s infrastructure drive picks up steam,” Arbis added.

LandBank Guian Angelo Dumalagan, for his part, said stronger consumer spending was likely offset by weaker annual growth in government expenditures and investments.

“Net exports also subtracted less to total output last quarter, although the annual rate of improvement was slightly less than in the prior three months,” he said.

FMIC and UA&P said solid domestic demand, spurred by national government and consumer spending and rising external demand, appear to be in synch to ensure another 6.5 percent GDP growth in third quarter.

Slowdown seen
The least optimistic estimate came from ANZ Research economist Eugenia Victorino, who said the Philippine economy likely slowed 6.3 percent.

“Private consumption is resilient. However, growth in investments and public spending is capped by high base effects,” she said.

Victorino said that despite a continued rise in exports, industrial production was showing signs of fatigue.

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