THE PHILIPPINE ECONOMY likely contracted in the third quarter as housing consumption remained muted after the central bank cut interest rates in August.
A BusinessWorld a survey of 12 economists and analysts conducted last week revealed an annual growth rate of average domestic product (GDP) of 5.7% in the July to September period.
If realized, it would mark a decline from 6.3% growth in the previous quarter and a 6% increase in the third quarter of 2023.
This would also bring current growth to 5.9%, just below the annual target of 6-7%.
The Philippine Statistics Authority (PSA) is scheduled to release third quarter GDP data on Thursday (Nov. 7).
Most economists polled by BusinessWorld he said GDP growth may slow down as inflation may reduce household consumption in the third quarter.
“On the demand side, household consumption was still the main driver of growth, although it may have slowed due to continued price pressures,” said Chinabank Research, which projected GDP growth of 5.7% in the third quarter.
InfThe figure rose to a nine-month high of 4.4% in July but fell to 3.3% in August. InfThe decline rose to a four-year low of 1.9% in September, below the 2-4% target. In the first nine months, consumer price growth reached 3.4%, which is also the central bank’s forecast for the year.
“We expect growth in 3Q 2024 to slow to 5.7% year-on-year as public spending, both in consumption and investment, is limited. Although the central bank started its tapering cycle in the middle of the quarter, we don’t think the change in monetary conditions has had an impact. [the third-quarter] growth,” HSBC ASEAN (Association of Southeast Asian Nations) economist Aris D. Dacanay said in an email.
The Bangko Sentral ng Pilipinas (BSP) started its easing cycle with a 25-basis-point (bp) cut at its August 15 meeting, followed by another 25-bp cut at its October 16 meeting. The target re-targeting was up to 6%.
“Private consumption will remain muted as the latest rate cuts will take time fit disrupts the economy,” said Sarah Tan, an economist at Moody’s Analytics.
Patrick M. Ella, an economist at Sun Life Investment Management and Trust Corp., said third-quarter GDP is likely to grow by 6 percent. This, as he expects household spending to grow by 5%-5.5% in the period ending September from 4.6% seen in the second quarter.
He noted that the effect of the rate cut could be seen in “financial development and strong inflation expectations going forward.”
Angelo B. Taningco, vice president and head of Research at Security Bank Corp., said the third-quarter growth could be attributed to “healthy” government spending, “steady” capital formation, and broader trade.fsnow.
Government spending jumped by more than a tenth to P4.26 trillion fin the first nine months, breaking the P4.22-trillion plan for this period.
So far, the government has released almost three-quarters of its revised P5.8-trillion spending plan this year.
“Sustained public and private construction activities continued to support growth in capital formation,” Chinabank Research said.
Sir Percival K. Peña-Reyes, director of the Ateneo Center for Economic Research and Development, said in an email that construction, transportation and storage, accommodation and food and food service activities are also likely to drive GDP growth to 6.5% in the quarter the third. .
However, some economists have noted that bad weather conditions in the period from July to September may have hurt agricultural production, which accounts for about 10% of GDP.
“As farm production is challenged by recent typhoons and heavy rains, non-farm GDP driven by private sector spending, is likely to make up the bulk of 3Q24 GDP with a 6.2% year-on-year increase,” Ruben Carlo O. Asuncion, CEO said. economist of the Union Bank of the Philippines.
Chinabank Research said agriculture is likely to remain “a drag” on growth in the third quarter as output fell due to bad weather.
For example, the impact of Super Typhoon Carina and advanced southwest typhoons left about P4.73 billion in agricultural damage,finfecting farmers and fsherfolk especially in Luzon.
Data for the third quarter of agriculture will be released on Wednesday.
“On the supply side, services continued to strengthen the economy but may have moderated between negative spending,” Chinabank Research said.
Mr. Asuncion also noted that recent inflation, strong job creation by the services sector in August, and strong productivity are “clear signs of macro stimulus during the quarter.”
WATCHING
“Overall, we expect the Philippine economy to grow by 5.9% in 2024,” said Ms. Tan of Moody’s Analytics. “That will not be in line with the government’s goal of 6% to 7% this year, but it will also go beyond many of its peers in growing regions.”
Harumi Taguchi, chief economist at S&P Global Market Intelligence, said they expect “low borrowing costs and soft financial conditions to boost domestic and business sentiment and boost credit growth in 2025.”
“The overall economic performance is expected to remain at a high level although the impact of the previous policy level is increasing and suppressing investment in the private sector. “While strong infrastructure spending will boost economic activity, a slight increase in remittances will support private consumption,” said Ms. Taguchi.
John Paolo R. Rivera, senior researcher at the Philippine Institute for Development Studies, said he maintains an optimistic outlook for the rest of the year as the increase in remittances ahead of the holidays is expected to boost consumer spending.
Mr. HSBC’s Dacanay said he expects domestic consumption growth to “eventually change direction for the better.”fsignalfyou are very comfortable with the quarter.”
“Exports of services are also likely to remain disrupted with the BPO (business process) sector leading the way while exports are holding back,” he said. – Pierce Oel A. Montalvo
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