Poll bares expectation of faster growth

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By Lourdes O. Pilar

ANALYSTS expect the country’s overall economic growth to have stayed above six percent last quarter on the back of strong domestic demand and recovering merchandise exports, results of a BusinessWorld poll showed.

GDP Growth Estimates

A poll of 11 economists and analysts late last week yielded a median gross domestic product (GDP) growth estimate of 6.6% for the third quarter, edging up from the second quarter’s 6.5% and January-March’s 6.4%, but slower than the 7.1% recorded a year ago.

If realized, the figure would put the nine-month growth average at 6.5%, hitting the low-end of the government’s 6.5-7.5% target for the year. Philippine economic growth averaged 6.45% last semester.

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

Socioeconomic Planning Secretary Ernesto M. Pernia was quoted in earlier reports as saying that full-year growth will likely settle around the midpoint of the target band, with third quarter growth hopefully outpacing that of the second quarter due to the rise in exports and government spending on infrastructure.

Moody’s Analytics, Inc., in a report last Friday, gave a 6.6% estimate for July-September GDP growth, saying in a note that “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.”

Analysts polled by BusinessWorld last week pointed to household spending as the driving engine for growth, coupled by spending in the public sector as well as improved outbound shipments.

For University of Asia and the Pacific economist Cid L. Terosa, GDP third-quarter growth is estimated to hover at 6.5%-6.8%, saying that “[g]rowth was supported by household final consumption spending based on vibrant remittance growth and capital formation.”

He added that trade had likewise “perked up” although its contribution was “muted.”

Ildemarc C. Bautista, vice-president and head of research at Metropolitan Bank & Trust Co., gave a 6.6% estimate for the third quarter, saying: “We see strong government spending to be supportive of strong GDP growth on top of robust household consumption spending and improvements in exports, the latter two being supported by the weaker peso translating to stronger purchasing power for OFW (overseas Filipino workers) remittances and exports being more competitive-priced.”

“We expect further growth down the line…” he said.

Mitzie Irene P. Conchada, associate dean at the School of Economics in De La Salle University, was of the same opinion, saying: “Government spending as well as investments started to pick up in the third quarter and I think these would be the major drivers for growth. The government has been aggressive in its ‘Build, Build, Build’ projects and public expenditure on construction, I think, will make a big difference starting in the latter half of this year.”

“Aside from this, exports are getting stronger and we are expecting it to build-up this quarter. Moreover, the agricultural sector is showing signs of sustained growth,” she said, giving a 6.8% third quarter estimate.

For Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines, “[t]he domestic economy likely expanded at a steady pace of 6.5% year on year in the third quarter of 2017, as stronger consumer spending was likely offset by weaker annual growth in government expenditures and investments.”

He added that net exports improved, even though “the annual rate of improvement was slightly less than in the prior three months.”

On the other hand, Angelo B. Taningco, economist at Security Bank Corp., gave a 6.3% estimate, saying “[t]his forecast is based on the view that GDP growth may have moderated in Q3 2017 amid a growth deceleration in personal consumption, capital formation and government spending amid dampened consumer and business confidence levels as well as inflationary pressures.”

“Also, adverse weather conditions may have adversely affected agricultural output while manufacturing sector appear to post a sluggish performance in Q3 2017.”

Household spending, which accounts for more than three-fifths of GDP, has been supported by a steady stream of remittances from Filipinos abroad that grew 5.4% from a year ago to hit $18.595 billion as of end-August. So far in the third quarter, cash remittances were up 7.1% and 7.8% in July and August, respectively.

Meanwhile, the government spent a total of P683.7 billion last quarter, 6.97% more than expenditures in 2016’s comparable three months albeit slower compared to the 14.44% growth it registered last year. Furthermore, Department of Budget and Management data showed infrastructure and capital outlays amounting to P142.1 billion for the third quarter, 3.1% more than the P137.8-billion program and 15.4% bigger than the year-earlier P123.2 billion.

The analysts as well as economic managers expected government spending to have picked up last quarter as more infrastructure projects were rolled on the second year of the current administration. For this year, the government is looking to spend P847.22 billion on public infrastructure, equivalent to 5.32% of GDP. This forms part of a P8.44-trillion spending plan that runs up to 2022.

Farm output growth — scheduled to be reported on Nov. 15 — is estimated to have been little changed from the second quarter performance of 6.18%, Agriculture Secretary Emmanuel F. Piñol told reporters last month. The sector is coming off a low base due to a prolonged dry spell that weighed on output well into 2016. To recall, farm output growth in the third quarter of 2016 was 2.98%.

Latest trade data saw year-to-date export and import growth at 12.2% and 7.4%, respectively, way above the official 5.0% and 10% targets for 2017. This brought the country’s balance of trade as of September with a net deficit of $18.942-billion, improving from last year’s $19.520 billion.

On the other hand, manufacturing slowed last quarter, with the PSA reporting a 3.7% decline in the volume of production index in September, its worst turnout in almost six years, bringing third quarter average to a 1.9% contraction.