THE PHILIPPINE ECONOMY probably slowed within the third quarter as family spending remained muted after the central financial institution minimize rates of interest in August.
A BusinessWorld ballot of 12 economists and analysts performed final week yielded a median gross home product (GDP) annual development estimate of 5.7% for the July-to-September interval.
If realized, it will mark a slowdown from the 6.3% development within the earlier quarter and the 6% growth within the third quarter of 2023.
This could additionally deliver the year-to-date development to five.9%, slightly below the 6-7% goal for the yr.
The Philippine Statistics Authority (PSA) is scheduled to launch third-quarter GDP information on Thursday (Nov. 7).
Most economists polled by BusinessWorld mentioned GDP development probably slowed as elevated inflation might have tempered family spending within the third quarter.
“On the demand aspect, family consumption was nonetheless the first driver of development, although it might have remained subdued resulting from persisting worth pressures,” mentioned Chinabank Analysis, which projected a 5.7% GDP development within the third quarter.
Inflation quickened to a nine-month excessive of 4.4% in July however slowed to three.3% in August. Inflation additional eased to a four-year low of 1.9% in September, settling under the 2-4% goal. Within the first 9 months, shopper worth development averaged 3.4%, which can be the central financial institution’s forecast for the yr.
“We count on development in 3Q 2024 to have cooled to five.7% yr on yr as public spending, each in consumption and funding, moderated. Although the central financial institution did start its easing cycle throughout the quarter, we don’t assume the change within the financial stance had affected [the third-quarter] development,” HSBC ASEAN (Affiliation of Southeast Asian Nations) economist Aris D. Dacanay mentioned in an e-mail.
The Bangko Sentral ng Pilipinas (BSP) started its easing cycle with a 25-basis-point (bp) minimize at its Aug. 15 assembly, adopted by one other 25-bp discount at its Oct. 16 assembly. This introduced the goal reverse repurchase charge to six%.
“Personal consumption will keep muted as it should take time for the latest charge cuts to filter by means of the financial system,” mentioned Sarah Tan, an economist at Moody’s Analytics.
Patrick M. Ella, economist at Solar Life Funding Administration and Belief Corp., mentioned third-quarter GDP probably expanded by 6%. This, as he expects family spending to have grown by 5%-5.5% within the interval ending September from 4.6% seen within the second quarter.
He famous the speed minimize’s impact could possibly be seen in “each improved liquidity and a firmer expectation of decrease ahead inflation.”
Angelo B. Taningco, vice-president and Analysis Division head at Safety Financial institution Corp., mentioned third-quarter development might have additionally been pushed by “wholesome” authorities spending, “resilient” capital formation, and a wider commerce deficit.
Authorities spending jumped by greater than a tenth to P4.26 trillion within the first 9 months, breaching the P4.22-trillion program for the interval.
Thus far, the federal government has already disbursed nearly three-fourths of its P5.8-trillion revised spending program this yr.
“Continued private and non-private building actions continued to help development in capital formation,” mentioned Chinabank Analysis.
Ser Percival Okay. Peña-Reyes, director of the Ateneo Heart for Financial Analysis and Improvement, mentioned in an e-mail that building, transport and storage, and lodging and meals service actions additionally probably drove GDP growth to six.5% within the third quarter.
Nonetheless, some economists famous adversarial climate circumstances within the July-to-September interval might have damage agricultural output, which accounts for round 10% of GDP.
“With farm output challenged by latest typhoons and powerful monsoon rains, the nonfarm GDP pushed by personal sector spending, would in all probability do a lot of the heavy lifting for 3Q24 GDP to rise by 6.2% yr on yr,” Ruben Carlo O. Asuncion, chief economist of Union Financial institution of the Philippines, mentioned.
Chinabank Analysis mentioned agriculture probably remained “a drag” on third-quarter development as output declined resulting from unhealthy climate.
As an illustration, the impact of Tremendous Storm Carina and the improved southwest monsoon left round P4.73 billion value of agricultural harm, affecting farmers and fisherfolk largely in Luzon.
Third-quarter agricultural output information will likely be launched on Wednesday.
“On the availability aspect, companies continued to energy the financial system however might have moderated amid lackluster consumption,” Chinabank Analysis mentioned.
Mr. Asuncion additionally famous that latest disinflation, robust employment technology by the companies sector in August, and strong manufacturing are “clear indicators of constructive macro catalysts throughout the quarter.”
OUTLOOK
“General, we count on the Philippine financial system to develop 5.9% in 2024,” Moody’s Analytics’ Ms. Tan mentioned. “That will likely be simply shy of the federal government’s 6% to 7% goal for the yr however will once more outperform a lot of its regional friends by way of development.”
Harumi Taguchi, principal economist at S&P World Market Intelligence, mentioned they count on “decrease borrowing prices and softer monetary circumstances to raise family and enterprise sentiment and raise credit score development in 2025.”
“General financial efficiency is predicted to stay on an uptick despite the fact that the influence from earlier coverage charge hikes suppress funding within the personal sector. Whereas strong infrastructure spending will drive financial exercise, a gentle enhance in remittance will help personal consumption,” Ms. Taguchi mentioned.
John Paolo R. Rivera, senior analysis fellow at Philippine Institute for Improvement Research, mentioned he maintains an optimistic outlook for the remainder of the yr as an increase in remittances forward of the vacations is predicted to spice up shopper spending.
HSBC’s Mr. Dacanay mentioned he expects development in family consumption to “lastly change route for the higher as inflation significantly eased over the quarter.”
“Providers exports additionally probably remained unperturbed with the BPO (enterprise course of outsourcing) sector main the cost whereas items exports probably held its floor,” he mentioned. — Pierce Oel A. Montalvo
