Q3 growth slower than expected

By Jochebed B. Gonzales, Researcher | Posted on November 26, 2015 11:20:00 PM | 

THE PHILIPPINE ECONOMY last quarter grew at its quickest pace this year, so far, on the back of a rebound in government spending and an acceleration in services, but it was still slower than the market had expected and put the government’s 7-8% full-year goal virtually out of reach.

The Philippine Statistics Authority (PSA) yesterday reported that gross domestic product (GDP) grew 6% in July-September, faster than the first and second quarters’ respective 5% and 5.8%, and the 5.5% logged a year ago.

The third-quarter growth however is slower than the 6.2% median estimate of a BusinessWorld poll of economists last week.

The latest growth print brings the year-to-date average to 5.6%, down from the 6% logged in 2014’s comparable nine months and still below the lower end of a 6-6.5% forecast given last August by the chief of the National Economic and Development Authority (NEDA) for the entire 2015.

“The 6% growth in the Philippines’ real gross domestic product in the third quarter of this year is certainly an encouraging sign of a steadily growing economy,” Economic Planning Secretary Arsenio M. Balisacan, who heads NEDA, said in a briefing yesterday.

“This makes the Philippines one of the fastest-growing major Asian economies. The country’s GDP growth was the third-fastest after China’s 6.9% and Vietnam’s 6.8%,” Mr. Balisacan said.

Budget and Management Secretary Florencio B. Abad attributed the third-quarter growth to higher government expenditures. Government consumption expenditures grew 17.4%, the fastest for any quarter since the 24.8% notched in the first three months of 2012.

The double-digit growth in state spending last quarter came off a 2.5% drop in last year’s comparable three months.

“Government spending, which continues to grow annually, points to the wider reach of government’s delivery of goods and services to the general public,” Mr. Abad said in a statement.

“Our increased capital expenditures are due to, among others, capital outlay requirements for the construction and upgrading of educational facilities and repair of roads and bridges.”

Household spending grew by 6.3%, while capital formation growth eased to 8.9% from 17.2% the preceding quarter, as construction slowed to 5.3% from 13.1%. Exports of goods, at constant prices, rose 5.4%, while those of services eased to its slowest this year at 11.6%.

On the production side, the services sector, which accounted for nearly half of total GDP, expanded the most at 7.3%, while agriculture was flat at 0.4% after contracting by 0.2% in the preceding quarter.

The industry sector grew 5.4% on the strength of manufacturing, which accelerated to 5.6% last quarter from 4.7% in the preceding three months.

Following the 5.6% growth of the economy in the first nine months of the year, hitting the lower end of a full-year forecast of 6% is attainable since growth of at least 6.9% in the fourth quarter “is very achievable,” Mr. Balisacan said.

“Given the 5.6% growth in the first nine months of the year, that would mean that the fourth quarter is to be at least 6.9%, which is very achievable,” said Mr. Balisacan.

“The fourth quarter is slightly to be driven by consumption growth on the demand side because first, the very low inflation improved the employment situation conditions… And since it’s the presidential elections, we would likely see a [not-so-ordinary] year for the fourth quarter.”

Bangko Sentral ng Pilipinas Governor Amando M. Tetangco, Jr. said the third-quarter GDP turnout points to the central bank likely maintaining its monetary stance. “GDP turnout confirms that the economy doesn’t really need further monetary stimulus at the moment,” Mr. Tetangco said. “But we are mindful of risks from natural disasters and global developments, including slower-than-expected growth among our trading partners. Further[more], inflation is seen to have bottomed last month. As such, we believe monetary settings continue to be appropriate for now.”

Emmanuel J. Lopez, University of Santo Tomas associate professor, said 6.7-6.9% GDP growth this quarter is “realistic because of the possible surge in consumption expenditure… plus the initial effect of bigger take-home pay of yearend bonuses brought about by increased tax exemption for Christmas bonus.”

“Also, the possibility of the injection of funds coming from election-related spending that will probably start during the Christmas season.”

DBS Bank economist Gundy Cahyadi believes 6% growth this quarter is “not impossible” as private consumption is “ticking up nicely into 2016,” but kept his 5.7% full-year growth forecast.

Cid L. Terosa, University of Asia and the Pacific senior economist, expects 6.5% growth this quarter. “[T]he performance of the service industries was strong. Remittances continued to buoy the economy through their direct effect on domestic consumption spending. Yes, definitely, we will achieve 6% growth for 2015.”

Source: www.bworldonline.com