Philippine economic growth remains solid in Q1, likely to expand 6.9 pct in 2017 - ANZ

The Philippine economic growth continued to be robust in the first quarter of this year, even if it undershot projections. The GDP data released earlier today showed that the economic growth slowed to 6.4 percent year-on-year in the March quarter from 6.6 percent recorded in the fourth quarter of last year. The slowdown was mainly because of deceleration in household spending growth. This is in contrast to the sustained growth in vehicle sales.

Private consumption growth continued to be above the long-term growth trend at 5.7 percent year-on-year rise. Meanwhile, total investment also came in strong at 11.8 percent year-on-year growth. Public consumption alleviated in line with expectations of a slow-down after an election year. Overall, domestic demand added 6.6 percentage points to the overall economic growth. The trade deficit narrowed in the first quarter, owing to a 20.3 percent year-on-year rise in exports.

Meanwhile, industry growth slowed to 6.1 percent year-on-year as construction growth declined, countering the growing trend in manufacturing. Services also decelerated in the quarter as real estate growth eased.

According to an ANZ research report, the Philippine economy is expected to expand 6.9 percent in the whole of 2017. In spite of undershooting expectations, the overall growth is solid and balanced. The deceleration in construction and real estate might possibly alleviate concerns of a property bubble. The near-term outlook for domestic demand and external environment continue to be positive, noted ANZ. Meanwhile, the monetary policy is expected to be tightened from the third quarter.

“In our view, the recent appointment of a central bank insider in Deputy Governor Nestor Espenilla as its next central bank chief will likely keep the focus on inflation targeting. We still expect cumulative tightening of 50bps in 2017, followed by a further 75bp of hikes in 2018”, added ANZ.