Philippine economic growth moderates slightly in Q4, likely to accelerate in 2017 on increased fiscal spending

Philippines economic growth slowed slightly in the fourth quarter of 2016. The GDP growth decelerated to 6.6 percent year-on-year in the December quarter from the 7 percent growth in the third quarter. It was in line with consensus expectations. For the whole of 2016 the economy expanded 6.8 percent, in line with expectations and an acceleration from 5.9 percent recorded in 2015.

The slowdown in the fourth quarter was presaged by the decline in growth in industrial activity in the two months to November, noted ANZ. The Philippine government had recently recorded a contraction of farm output in the fourth quarter. This was consistent with the contraction of 1.1 percent in agricultural production. On the expenditure front, household spending growth stayed above the trend at 6.3 percent. Total investment also came in strong, rising 15 percent. It was supported by election related spending throughout 2016.

The Philippine economic growth is expected to accelerate to 6.9 percent in this year, with the help of increased fiscal spending, according to ANZ. There are emerging risks that deficit of goods trade might balance out remittance inflows. Current account outlook might rely on the services trade growth. In the past few years, services trade has been recording surpluses of about 1 percent to 1.5 percent of GDP, added ANZ.

The Bangko Sentral ng Philipinas is expected to be the first Asian central banks to tighten monetary policy, stated ANZ. With solid domestic demand, further underpinned by a renewed push for infrastructure spending and rising inflation outlook, interest rate is expected to be hiked in the third quarter of 2017, added ANZ.