Q2 sustained fast GDP growth — poll

ECONOMISTS expect gross domestic product (GDP) growth last quarter to have been sustained past six percent on the back of higher government spending, as well as improved trade and farm output.

A poll of 12 economists and analysts late last week yielded a median GDP growth estimate of 6.5% for second quarter, a bit faster than the first quarter’s 6.4% but slower than the 7.1% recorded a year ago.

If realized, the figure would put the first-half average growth at 6.45%, just a notch below the low-end of the government’s 6.5%-7.5% target for the year.

Official second-quarter GDP data will be released on Thursday by the Philippine Statistics Authority (PSA).

The first quarter’s 6.4% growth was slower than the 6.9% posted in 2016’s comparable three months as household consumption and government spending weakened. That pace, however, still made the Philippines the second-fastest major Asian economy in that period next to China, whose economy grew by 6.9%.

Earlier last month, Socioeconomic Planning Secretary Ernesto M. Pernia said the economy likely expanded faster than the first quarter’s 6.4% but slower than the seven percent the National Economic and Development Authority head had estimated in May for April-June.

Moody’s Analytics, Inc., in a report last Friday, gave a 6.8% estimate for the second quarter, citing a pickup in trade, private consumption and investment.

“The main boost will come from exports, which have been expanding rapidly in recent months largely because of stronger shipments of electronics. Meanwhile, domestic 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 noted in its August 14-18 Asia-Pacific Economic Preview.

Analysts polled by BusinessWorld were likewise optimistic, with most agreeing on the positive impact of public spending on second-quarter growth.

Ruben Carlo O. Asuncion, chief economist at the Union Bank of the Philippines (UnionBank) gave an estimate of 6.5%, saying that government spending is “still the crucial driver that needs to deliver.” He added that “[t]he implementation of the President Rodrigo R. Duterte administration’s ‘Build, Build, Build’ program is a major factor in supporting robust GDP growth in the succeeding quarters of 2017.”

Mr. Asuncion also cited the approval and implementation of the government’s tax reform packages — the first of which was approved by the House of Representatives in end-May and now awaits Senate approval — as another key factor that will support growth in the medium to long term. “A consensus bill from the Senate and the House [of Representatives] is expected in the fourth quarter and ready to be signed by the President and implemented beginning 2018. This reform is important and will eventually fund infrastructure development in the country that can later on have multiplier effects on the macroeconomy.”

Gundy Cahyadi, economist at Singapore-based DBS Bank Ltd., said separately that “it is clear to us that government spending has accelerated… from four percent in first quarter to more than 13% in second quarter.”

“This is likely to be supportive of overall GDP growth,” he said.

“What is more interesting, however, is to see how investment growth fared in 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,” added Mr. Cahyadi, who gave a 6.2% GDP growth estimate.

Rajiv Biswas, Asia-Pacific chief economist at IHS Markit, placed second-quarter growth at 6.4%, citing continued domestic demand, government spending and robust export growth.

“Private consumption expenditure is estimated to have remained robust, boosted by continued expansion in remittances from workers abroad,” Mr. Biswas said, adding that infrastructure spending and residential construction are also expected to be strong, with growth in household incomes supporting residential property purchases.

Another bright spot, analysts pointed out, would be continued recovery of merchandise exports.

IHS’ Mr. Biswas said that exports in the second quarter have “shown rapid growth,” even as he noted that the net impact on GDP “will be dampened by buoyant imports due to the strength of domestic demand.”

Cid L. Terosa, University of Asia and the Pacific (UA&P) economist, also noted that trade “particularly exports, has improved.”

Commenting on sectoral growth, Mr. Terosa said agriculture, industry and services have “continued to maintain their momentum in terms of output growth,” and that inflation “continues to be manageable.”

Mr. Terosa estimated second-quarter GDP growth at 6.5-7.0%.

UnionBank’s Mr. Asuncion sees momentum spurred by a continuation of the recovery of agriculture and merchandise exports, coupled with solid domestic consumption supported by remittances from Filipinos abroad.

April-June period saw merchandise exports grow 19.1% in April, 14% in May and a nearly flat 0.8% in June. These, however, are slower than January-March’s respective 22%, 8.7% and 18.1%.

Last semester saw merchandise export sales grow 13.6% from the past year, surpassing the government’s five percent projection for 2017.

Cash remittances from overseas Filipino workers grew 4.8% to $11.346 billion as of May from the $10.859 billion recorded in 2016’s comparable five months. The central bank expects remittances to rise by four percent annually to $28 billion this year.

Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines, pencilled a 6.7% GDP growth for last quarter, citing higher government spending as well as growth in agriculture and services. “Good weather conditions possibly contributed to stronger growth in farm output,” he said.

The PSA is scheduled to report second-quarter farm sector performance on Tuesday.

The government’s “Build, Build, Build” program will see more than P8.4 trillion spent on infrastructure projects until 2022, when this segment’s contribution to GDP should have risen to 7.45% (P1.899 trillion) from this year’s planned 5.32% of GDP (P847.22 billion).

Government spent a total of P715.5 billion last quarter, 13.6% more than expenditures in 2016’s comparable three months, which saw a 10.89% hike. Department of Budget and Management data showed infrastructure and capital outlays amounting to P131.6 billion for the second quarter, three percent more than the P127.7-billion program and 5.9% bigger than the year-earlier P124.2 billion.

Meanwhile, latest government data show farm output having expanded 5.28% in the first quarter from a year ago, recovering from the previous quarter’s contraction. The sector was coming from a low base last year, with volume of production falling 4.62% in the first quarter of 2016 due to the prolonged dry spell and damage caused by two typhoons.

Agriculture Secretary Emmanuel F. Piñol had said last month that the farm output growth for the second quarter likely matched the preceding quarter’s reading. Mr. Piñol had then estimated agriculture growth in the April-June period to have clocked around five percent, close to the first three months’ 5.28% and a turnaround from the 2.34% slump in the second quarter of last year. — Lourdes O. Pilar