Economy likely slowed further in Q2
Philippine economic growth may have slowed anew in the second quarter given global and domestic challenges, analysts said.
Ten out of the 12 economists surveyed forecast a slowdown from the first quarter's 6.4-percent expansion, which while better than expected was still lower than the 7.4 percent recorded in the last three months of 2022.
If realized, the median forecast of 6.0 percent gross domestic product (GDP) growth for April-June would be the slowest since the economy began recovering from the impact of the Covid-19 pandemic.
Preliminary second quarter GDP data will be released by the Philippine Statistics Authority (PSA) this Thursday, August 10.
Sun Life Financial economist Patrick Ella, who had the lowest forecast of 5.5 percent, said consumption was likely still the main driver of growth.
But with the impact of high inflation and interest rates yet to fully work its way through the economy, he said that further slowdowns were likely, leading to full-year growth failing to hit the government's 6.0-7.0-percent goal.
ING Bank Manila senior economist Nicholas Antonio Mapa, who expects a slowdown to 5.6 percent, said "revenge spending could be waning as households shift to more 'normal' spending and saving behavior."
"Government spending has been soft with some months posting negative growth," he added, which could pose a challenge to meeting this year's target.
University of Asia & the Pacific economist Victor Abola, who also sees a 5.6-percent result, said inflation remained high and was not falling fast enough due to renewed oil and commodity price hikes.
Meanwhile, China Banking Corp. chief economist Domini Velasquez and Emmanuel Lopez of the Colegio de San Juan de Letran Graduate School both projected 5.9-percent growth for the period.
Velasquez said this would be due to the impact of higher interest rates on both business and household spending.
"Higher inflation could have been offset by post-pandemic spending which continued at a more moderate pace," she said.
"In terms of government spending, we saw substantial increases in infrastructure spending but government consumption growth remained lukewarm," she added.
"There is a need to hasten government spending in identified agencies [that are] lagging behind."
Lopez, for his part, said second quarter growth would have been supported by both consumer spending and government infrastructure investments.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said a year-on-year deceleration in growth, which he estimated to have hit 6.0 percent, should be expected given the spending for the presidential and local elections last year.
A reduction in individual income tax rates, meanwhile, could have continued to support consumer spending and mitigated the impact of high inflation.
Philippine National Bank economist Alvin Joseph Arogo also expects a 6.0-percent result, with the slowdown from the first quarter due to inflation and interest rates having dampened household spending and capital formation.
"Upside risk [to the outlook] is stronger than expected pent-up demand, while downside risk is higher sensitivity of capital investments to the increase in borrowing cost," he added.
Both S&P Global senior economist Rajiv Biswas and Security Bank Corp. chief economist Robert Dan Roces, meanwhile, projected a smaller moderation to 6.1 percent.
"Growth may have been driven by the still robust consumer spending and improved exports," Roces said.
"Private investments continued in the second quarter, supporting economic activity, while low government consumption served as a dampener," he added.
Biswas pointed to weak external demand in key markets, notably the eurozone and mainland China, as weighing on growth moving forward.
"A key downside risk during late 2023 and in 2024 is if a severe El Niño weather event develops globally, which could bring drought conditions in the Philippines, reducing the production of key food commodities such as rice as well as pushing global agricultural prices and inflationary pressures higher," he added.
Mitzie Irene Conchada of De La Salle University, meanwhile, projected inflation to hit 6.2 percent in the second quarter, saying that the economy will continue to display robust growth.
"We still see a strong consumer demand, mainly based on 'revenge spending' but this is likely to moderate in the coming months," Conchada said.
"Government spending is expected to [have] increase[d] in the second quarter as it continues its infrastructure projects."
"However, the current account deficit is likely to worsen on the increase in imports of capital goods and food to augment the shortage in the domestic market."
On the other hand, Pantheon Macroeconomics economist Miguel Chanco said growth could have accelerated to 6.9 percent in the second quarter but added that "this improvement will be very skin deep, driven largely by flattering base effects."
"[The] second half will be very different, as the disappearance of the lift from base effects should more accurately reveal the waning quarter-on-quarter momentum in domestic demand," he added.
"The government's hands are unfortunately tied, as it's still carrying a big budget deficit from the pandemic-era blowout"
Capping the survey, meanwhile, was Oxford Economics assistant economist Makoto Tsuchiya who offered the highest growth forecast of 7.5 percent, also largely due to base effects.