By Aubrey Rose A. Inosante, A reporter
THE Philippine economy grew by a weaker-than-expected 5.2% in the third quarter, as bad weather hurt agricultural output and government spending, a statistics agency said on Thursday.
Preliminary data released by the Philippine Statistics Authority (PSA) showed that the Philippines’ gross domestic product (GDP) grew by an annualized 5.2% in the July to September period, down from a revised growth of 6.4% in the second quarter and 6% on the year . past.
This was also a weak growth in fquarters from or from 4.3% growth in the second quarter of 2023.
It was also below the average forecast of 5.7% over the period BusinessWorld a survey of 12 economists and analysts.
On a quarter-on-quarter adjusted annual basis, GDP grew by 1.7%, compared to 0.7%.
Despite growing up slowly, Mr. Balisacan said the Philippines’ third quarter GDP growth was the second fastest in the region after Vietnam (7.4%).
“Our economy continues to grow slowly; the latest GDP fStatistics show steady growth,” National Economic and Development Writerity Secretary (NEDA) Arsenio M. BaliSacan said cryingfon Thursday.
Philippine GDP growth in the July to September period was better than Indonesia (4.9%), China (4.6%), and Singapore (4.1%).
In the first nine months of the year, Philippine GDP growth averaged 5.8%, slower than the 6% posted last year. This was slightly below the government’s target of 6-7% growth this year.
“The economy must grow by at least 6.5% to meet the government’s target for the last quarter of 2024. We still hope that this targeted growth will be achieved,” said Mr. Balisacan.
He pointed out that the weaker than expected growth in the third quarter had the effect of a series of typhoons in the agricultural sector.
Agriculture, forestry and fishing fell by 2.8% in the third quarter, a result of the 0.9% growth posted last year. The sector accounts for about a tenth of the Philippine economic output.
“The crop sector under the agriculture sector decreased year-on-year by 2.8%, againfto show the effects of El Niño during planting and efseven storms, moreover Habagat (monsoon), during the harvest,” said Mr. Balisacan.
He cited the combined damage and loss of agriculture from the six typhoons in the third quarter and the recent Super Tropical Storm Kristine has reached P15.8 billion.
At the same time, the industrial sector grew by 5% in the third quarter, down from 5.6% last year due to base effects. Construction growth slowed to 9% from 14.5% last year.
Services expanded 6.3% in the July to September period, down from 6.8% in the same period in 2023.
“Successive storms have halted classes and operations in government and some private offices, causing administrative delays and supply chain disruptions,” said Mr. Balisacan.
FOOD IS UP
Meanwhile, household consumption, which accounts for more than 70 percent of the economy, jumped 5.1 percent year-on-year in the July to September period, improving from 4.7 percent in the second quarter but stabilizing from a year ago.
“Domestic spending stood out the most, growing by 5.1%, faster than the last two quarters due to inflation. The recent easing of policy rates and reductions in demand can help bring more money into the economy and increase the purchasing power of our people,” Treasury Secretary Ralph G. Recto said in a statement.
Mr. Balisacan noted that there was a decrease in tourism and leisure costs as typhoons caused the cancellation of 138 flights in the third quarter.
Gross capital formation, which is part of economic investment, grew 13.1% in the third quarter, a change from 0.3% a year ago.
“The shift in investment in durable goods has fueled economic growth. Private construction also maintained double-digit growth (11.9% from 10.3%), while public construction decreased (3.7% from 21.7%) due to administrative delays and disruptions associated with adverse weather conditions,” said Mr. Balisacan.
Government expenditure growth slowed sharply to 5% in the third quarter from 11.9% in the previous quarter.
‘Weather-related disruptions and unrest in the last quarter have caused this delay in (government) spending. And that happens even more to those related to infrastructure,” said Mr. Balisacan.
Exports of goods and services contracted by 1% in the third quarter, resulting from growth of 2.5% last year.
Imports of goods and services rose 6.4% in the period ending September, an improvement from a 1.6% decline last year.
“This means a deep decline in net exports by 32.6%. Exports have been reduced by a significant decline in electronic products, especially semiconductors, minus 17.9%,” said Mr. Balisacan.
He said the industry is “under construction and has not yet met the needs of new products in the world market.”
Economists are hoping for faster growth in the fourth quarter as consumer spending is expected to increase during the holiday season.
“We expect increased holiday spending, stable asset prices (given low inflation), low interest rates, and a strong labor market. In the typhoon-hit areas, recovery efforts will drive economic activity and, hopefully, bounce back better,” said Mr. Balisacan.
Mr. Recto said he expects private construction to rebound amid low interest rates.
Since August, the Bangko Sentral ng Pilipinas (BSP) has cut interest rates by 50 basis points (bps) this year, bringing the rate to 6%.
‘BIG DISAPPOINTMENT’
Miguel Chanco, emerging Asia economist at Pantheon Macroeconomics, said the third-quarter GDP print was “very disappointing,” although it was better than its forecast of 4.8%.
“Currently, we are sticking to our forecast that full-year GDP growth will slow to 5.4% this year from 5.5% in 2023, which means headline growth will continue to slow in the fourth quarter to 4.5%,” he said. in the report.
Shivaan Tandon, Markets Economist at Capital Economics said GDP growth is unlikely to continue as “slow growth in remittances, monetary policy and weak export demand weigh on activity.”
“Although the worst is over for private consumption in the Philippines, we doubt that this pace of consumption growth is sustainable. Admittedly, continued upside from lower income and looser monetary policy should support consumption,” said Mr. Tandon.
Mr. Tandon said the risk to domestic demand has increased, as the US dollar is expected to strengthen.
“This raises the risk that the BSP, which has arguably been more focused on the Fed than other major banks in Asia (except Bank Indonesia), has opted for fewer rate cuts than otherwise would have been possible,” he said.
He noted that exports will remain under pressure as the global economy slows down and the outlook remains clouded by tariffs that may be imposed by US President-elect Donald Trump.
On the other hand, ANZ Research economists say private consumption is likely to improve, as the unemployment rate fell to 3.7% in September and real wages posted growth in the third quarter.
“Strength in the Philippines’ labor market and continued growth in remittances will slightly strengthen personal consumption going forward, in our view. We emphasize ‘moderate’ as a stable labor market is partially offset by the need for households to rebuild savings as reflected in the domestic sentiment index,” said ANZ Research Economist Arindam Chakraborty and Chief Economist Sanjay Mathur.
However, ANZ Research economists say exports will remain muted in the near term, amid weak foreign demand.
“Overall, given the weak inflation outlook in the near term and soft GDP growth in Q3 2024, we think the BSP will cut rates by another 25 bps in December 2024,” ANZ Research said.
BSP Governor Eli M. Remolona, Jr. hinted at the possibility of a 25-bp rate cut in December. If possible, this would bring the benchmark to 5.75% by the end of 2024.
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