Philippine economy expands year-on-year in Q3, private consumption likely to grow in months ahead

The Philippine economy expanded on a year-on-year basis in the third quarter. The GDP growth accelerated to 6.9 percent in the September quarter after the upward revision in the second quarter. However, on a sequential basis, the economic growth decelerated to 1.3 percent from the upwardly revised 2 percent in the second quarter. Even if growth momentum appears to have alleviated, high frequency indicators imply that economic activity has risen again in the fourth quarter.

Net exports improved considerably in the third quarter. This is the first in 11 quarters where net exports recorded a positive contribution to the overall growth, countering the moderation in domestic demand to 5.4 percent from 6.5 percent in the second quarter.

The momentum in imports is pulling back. Even as the growth in expenditure alleviated to 2.8 percent, the real estate industry recorded a strong rise of 7.7 percent. In the meantime, private consumption is mean-reverting at 4.5 percent year-on-year, noted ANZ.

Industry in the Philippines continued to be on an upward path, rising 7.5 percent from 7.4 percent in the second quarter, offsetting the deceleration in agricultural growth. The strong growth in real estate and trade is adding to the strength in services.

“We see upside risks to our 2017 GDP growth forecast of 6.5 percent”, stated ANZ.

Assuming that infrastructure spending has accelerated further in the fourth quarter, investments and private consumption are then expected to rise in the months ahead. The rebound in exports is deeper than anticipated initially, also providing support to overall economic growth.

Given strong growth, upside risks to inflation are rising, even as policymakers maintain that the consumer price inflation is manageable. Imbalances are deepening on the back of the continued rise in credit growth, undeterred expansion in real estate and the deterioration in the current account.

“We expect 50 bps (cumulative) of rate hikes in Q1 2018”, added ANZ.

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