Philippine GDP growth decelerates in Q1 2019 to weakest in nearly four years, likely to bounce back

The Philippine economic growth slowed in the first quarter 2019 to the softest pace in almost four years. On a year-on-year basis, the GDP growth decelerated to 5.6 percent, while it came in at 1 percent on a quarter-on-quarter basis.

Domestic demand growth accelerated in the first quarter to 7.3 percent year-on-year from 6.1 percent in the prior quarter, adding 8.2 percentage points to the overall growth. Meanwhile, private consumption bolstered to 6.3 percent year-on-year from 5.3 percent previously.

Nevertheless, public consumption decelerated to 7.4 percent year-on-year, from 12.6 percent year-on-year in the fourth quarter 2018, reflecting the delay in enacting the 2019 budget. Significantly, public construction investment shrank 8.6 percent year-on-year, with private investment activity also weakening. In all, gross fixed capital formation growth eased further to 5.7 percent in the first quarter from 8.6 percent in the prior quarter.

Growth in export eased to 5.8 percent on a year-on-year bases from 14.4 percent in the prior quarter, owing to softer external demand, especially for technology products. In the meantime, stronger private consumption saw imports soften by less to 8.3 percent in the first quarter from 12.4 percent, resulting in a larger negative contribution from net trade.

Meanwhile, on the supply side, industry growth dropped to 4.4 percent year-on-year, owing to lower contribution from the construction sector. Growth in agriculture and associated components also lost momentum, growing at 0.8 percent in the quarter. Services growth accelerated to 7 percent year-on-year.

Some bounce-back in growth is expected after today’s print, noted ANZ in a research report. Slowing inflation is likely to underpin private consumption.

“Additionally, the end of the impasse on the 2019 budget will allow the government to resume infrastructure investments, although the impact is not expected to show until H2. That said, renewed US-China trade tensions and a weak outlook for exports will likely pull the other way”, added ANZ.