Philippine stocks rose for a seventh day following reports that the gross domestic product (GDP) growth picked up to 5.9 percent in the third quarter from 4.3 percent in the second quarter.
The 30-company Philippine Stock Exchange index gained 33 points, or 0.54 percent, to close at 6,188.22 Thursday, while the broader all-shares index rose 11 points, or 0.36 percent, to settle at 3,329.38 on a value turnover of P4.6 billion.
Ryota Abe, economist at Asia Pacific Division of Sumitomo Mitsui Banking Corp. said the third-quarter economic performance was above market expectations. “The GDP data suggest that the Philippine economy may be more resilient than expected to high interest rates,” he said.
The peso also climbed Thursday to close at 55.89 against the US dollar from 56.06 Wednesday. “The USD/PHP has been moving stably. So, the need for an additional interest rate hikes has become less clear than before. In this respect, chances for the BSP [Bangko Sentral ng Pilipinas] to continue to raise its rates have decreased, which is a positive factor for the economic outlook,” said Abe.
Data from the Philippine Statistics Authority showed that spending on services continued to grow at a high rate, while spending on goods remained subdued. Despite uneven consumption patterns, private consumption as a whole remained firm and supported the economic growth, said Abe.
The services sector grew 6.8 percent in the third quarter, consistent with household spending patterns. “We saw the construction industry has been growing at a high 14.0 percent, reflecting the strong construction investment. Relatively, the manufacturing sector grew by only 1.7 percent, and its contribution remained small at 0.3 percentage points. In general, despite high interest rates, the strength of domestic demand was noticeable,” said Abe.
Abe said the Philippine inflation was also slowing, and the adverse effects of interest rate hikes on the economy were so far limited.
“In the prevailing circumstances, there is little incentive for the BSP to actively consider an additional rate hike at the next meeting. In fact, the Philippines Finance Minister Benjamin Diokno, a member of the Monetary Policy Committee, has announced that he will vote to leave interest rates unchanged at the next meeting on Nov. 16, citing falling inflation as the reason. We expect USD/PHP to be at 56.8 at the end of the year,” Abe said.
Meanwhile, Makoto Tsuchiya of Oxford Economics said economic growth was expected to moderate over the next few quarters, given the slowing global growth and higher domestic interest rates.
“Nonetheless, today’s stronger-than-expected print means we will upgrade our current growth forecast of 4.5 percent for 2023,” Tsuchiya said.
Tsuchiya said the 3.3-percent quarter-on-quarter seasonally adjusted growth in the third quarter was the strongest since the first quarter of 2010, excluding the initial rebound from the Covid pandemic.
“We continue to expect growth to slow in the quarters ahead. Despite a stronger-than-expected Q3, most of the pickup was driven by the public sector, both government investment and consumption. The external sector will likely continue to remain subdued amid slowing global growth, while higher rates and lower foreign demand will constrain firms’ investment,” Oxford Economics said.
“We expect household spending to soften amid lower confidence, normalizing consumption patterns away from services, and the need to rebuild savings. That said, today’s strong print means we will likely revise up our relatively cautious 4.5-percent growth forecast for 2023,” it said.