PHILIPPINE economic growth may have been higher than expected in the second quarter, but not all analysts are optimistic about the full-year result.
Gross domestic product (GDP) growth accelerated to 6.3 percent in April-June, improving from 5.8 percent in the first quarter, following a surge in government spending and private investments.
But household consumption, which accounted for two-thirds of output, posted marginal growth.
Citi Philippines economist Nalin Chutchotitham acknowledged the muted consumer spending, but said an uptick in the latter half of 2024 would allow the country to hit the bottom end of this year’s 6.0- to 7.0-percent GDP growth target.
Citi previously forecast a 6.1-percent expansion.
Fitch unit BMI Country Risk & Industry Research, on the other hand, said that second-quarter growth “paints a misleading picture of the economy’s health, as this number was flattered by a favorable base of comparison.”
It subsequently trimmed its 2024 GDP forecast to 6.0 percent from 6.1 percent.
“In our view, Q2 GDP was fairly healthy but less robust vs. pre-Covid,” Citi’s Chutchotitham said.
While other analysts have said that household spending would remain muted, she forecast a gradual recovery over the rest of the year with inflation expected to ease after peaking in July.
Robust employment and rate cuts will also help drive growth for the rest of the year, Chutchotitham said.
As for 2025, Citi Philippines, said it was keeping its forecast at 6.0 percent amid “increasing external headwinds from the slowdown in several advanced economies, which are the Philippines’ key trading partners and sources of overseas workers’ remittances.”
BMI, meanwhile, said the “latest growth outturn clearly showed that we have overestimated the health of the Philippine economy.”
Achieving 6.2-percent growth will require an expansion of around 6.4 percent in the second half, an outcome BMI said was “unlikely” to be achieved.
The 0.5-percent quarter-on-quarter growth is also the slowest since April-June last year, it noted, adding that “much of this weakness stemmed from a poor performance in the external sector, as we had expected.”
“Indeed, exports contributed just 1.2 percentage points (pp) to headline growth, halving the strong 2.4-pp contribution in the prior quarter,” BMI continued.
“Along with a strong pickup in imports, net exports detracted 0.8 pp from the headline figure. Against the backdrop of a slowing global economy in H2, external demand will prove even less supportive over the coming quarters.”
Chutchotitham, meanwhile, said the second-quarter growth surprise would not be “not strong enough to delay [a] policy rate cut in August.”
Citi Philippines expects a 25-basis point (bps) this Thursday, to be followed by additional 25 bps in October and December and a cumulative 75 basis points in 2025.
The BSP’s benchmark rate currently stands at 6.5 percent, the highest since 2007, following 450 points of rate hikes since May 2022 as inflation started surging.
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