STRONGER household and government spending likely pushed second-quarter economic growth to within the government’s recently lowered target for 2025, analysts said.
After the 5.4 percent posted in January-March, below the 6.0- to 8.0-percent goal in effect at that time, gross domestic product (GDP) growth for the next three months could have picked up to 5.6 percent, analysts polled by The Manila Times said.
The median forecast, if realized, will fall near the lower end of the 5.5- to 6.5-percent target adopted by economic managers in June. It is lower, however, than the 6.3 percent recorded in April-June last year.
Preliminary second-quarter GDP data will be released by the Philippine Statistics Authority (PSA) this Thursday, Aug. 7. The results, which will follow July inflation figures due Aug. 5, will factor in the Bangko Sentral ng Pilipinas’ rate-setting meeting on Aug. 28.
Tempered expectations
Not all of the economists polled said growth would have improved.
With the lowest forecast of 5.2 percent, Union Bank of the Philippines chief economist Ruben Carlo Asuncion said growth would be slow but steady amid a challenging environment.
He noted that lower inflation would have helped ease costs and support spending, but overall demand likely remained weak due to low consumer and business confidence, limited government spending during the elections and poor job quality.
“Selective export strength — particularly in electronics and mineral products — [would have] provided some lift, but global uncertainties and the delayed US Fed (Federal Reserve) easing following a stronger-than-expected US inflation report continue to weigh on investor confidence and trade dynamics,” Asuncion added.
Growth will also be measured against a high base from the same quarter last year, “which naturally tempers the year-on-year figure despite continued expansion.”
Pantheon Macroeconomics economist Miguel Chanco and Philippine National Bank economist Alvin Arogo also expect growth to have moderated, in their case to 5.3 percent.
Arogo said that this would be caused by “weak business sentiment due to trade uncertainty.”
This was echoed by Chanco, who said a “renewed slowdown in private consumption and government spending” would have weighed down growth with “fixed investment and exports providing some cushion.”
Spending, trade boost
Chinabank Research, on the other hand, said growth could have slightly improved to 5.5 percent due to “household consumption, which is the country’s main growth engine.”
“A narrower goods trade deficit, driven in part by front-loading from US importers ahead of the imposition of higher US tariffs and by growing demand for Philippine products in other export markets, also likely contributed to the upside,” Chinabank Research said.
“On the other hand, the election-spending ban ahead of the midterm elections may have weighed on government spending and public infrastructure activities,” it added.
At 5.6 percent, Emmanuel Lopez from the University of Santo Tomas Graduate School and HSBC Global Research economist Aris Dacanay said growth would have been led by consumption and goods exports.
“Seasonality was likely at play, with election spending from the May midterm elections lifting both household and government consumption,” Dacanay added.
“In addition, with importers abroad frontloading their orders in anticipation of higher tariffs from the US, goods exports likely grew over the course of the quarter as exporters — mostly in electronics and agriculture — rode the global tailwinds of last-minute frontloading,” he added.
Bank of the Philippine Islands senior economist Emilio Neri said growth could have hit 5.8 percent, with household consumption likely remaining the main growth driver.
This would have been supported by “election-related spending, easing inflation (particularly the sustained decline in rice prices) and continued strength in consumer lending.”
“Stronger food exports may have been bolstered by improved weather just as foreign sales of electronics were booked ahead of the implementation of higher US tariffs,” Neri also said.
Having the highest forecasts of 6.0 percent each, Rizal Commercial Banking Corp. chief economist Michael Ricafort and Sun Life Investment Management and Trust Corp. economist Patrick Ella said growth would have improved thanks to robust spending.
“This should be driven by consumption, government spending (we expect spill-over from election spending) and we also see improved investor sentiment hence private sector capital outlay should improve vs first quarter,” Ella said.
For Ricafort, “easing inflation would support future cuts in key policy rates that would fundamentally lead to faster economic growth than otherwise.”
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