The Philippine economy likely expanded by 6 percent year-on-year in the third quarter, faster than the 5.6-percent expansion in the second quarter, as government spending accelerated during the period, DBS Bank of Singapore said over the weekend.
The bank said while inflation was set to miss the official target of 2 percent to 4 percent this year, the gross domestic product growth remained strong. Inflation in the first 10 months averaged 1.5 percent, lower than the government’s target range.
“[The] third-quarter 2015 GDP data next week is likely to show that growth has returned to the 6-percent territory in the period. Even if low base effects might have played a part, it is no surprise that domestic demand remains robust,” DBS said.
The government is set to release the third-quarter data on Nov. 26.
DBS said the government played a significant role on the expected third-quarter expansion. It said fiscal spending accelerated in the period, growing close to 20 percent year-on-year and brought the year-to-date growth to 12 percent.
“After two consecutive years of seeing a 5-percent growth, fiscal spending is finally back to the double-digit territory. There are some concerns if the 2016 elections may weigh on the pace of fiscal spending ahead,” it said.
The bank said while this was clearly something to monitor closely, it was also important to note that private sector growth remained resilient.
It said private consumption growth continued to trend around the 5.5 percent to 6 percent level and constantly contributed 4 percentage points to overall GDP growth in the past five years.
DBS also said “monthly data, including retail sales, continues to paint a strong outlook into next year.”
The first quarter GDP at 5 percent was dragged down by the government’s anemic fiscal expenditures which actually began in the third quarter of 2014. The government became cautious to spend after the Supreme Court earlier ruled the administration’s Disbursement Acceleration Program as unconstitutional. The high tribunal, however, reversed the ruling later.
The government vowed to accelerate fiscal spending at the start of the second quarter. Second-quarter GDP grew 5.6 percent, bringing the first-half average to 5.3 percent, which was still below the government’s target of 7 percent to 8 percent for the year.
Moody’s Analytics, a division of Moody’s Corp., said that despite the rosy outlook in the third quarter, exports remained a “weak point” due to weakened global demand, especially from China. The world’s second-largest economy is an important trading partner of the Philippines.
Exports fell by 24.7 percent in September as sluggish global demand and depressed prices weakened the shipments of all key commodities.
The Philippine Statistics Authority said total revenue from Philippine exports fell to $4.4 billion in September 2015 from $5.8 billion recorded in the same period last year. This was the largest decline in export revenues since September 2011 when the supply-chain disruption in key Asian countries caused a sharp decline in demand for electronics.
British bank Hongkong and Shanghai Banking Corp. said the Philippines would continue to outperform some of its peers in the region even if economic growth settled at the 5-percent level this year.
“The fundamentals of the economy remain strong… Even if the economy grows at 5 percent, it will remain one of the bright spots in the Asian region,” Joseph Incalcaterra, HSBC Asia-Pacific economist, said in a briefing.
Last year, the economy grew by 6.1 percent, slower than 7.2 percent in 2013, but still considered one of the fastest in the Asian region.