THE Philippine economy may likely post weaker growth this year following the “disappointing” second-quarter expansion, several analysts and economists have said.
The country’s gross domestic product (GDP) grew 4.3 percent in the second quarter from 6.4 percent in the first three months of the year. The slower growth was due to smaller expansion in household consumption and lower government spending, among others.
Due to the lower GDP growth in Q2, the government target of 6 to 7 percent growth now “looks out of reach”, ING Bank Manila’s Senior Economist Nicholas Mapa said in a separate report, given the bank’s slower growth expectations in the coming quarters.
Mapa said they have lowered their growth outlook for the year to 5 percent from 5.5 percent.
“We believe we could see slower growth due to fading revenge spending and the lagged impact of BSP policy tightening,” he told ABS-CBN News.
He added: “The upside to growth could be delivered by the government, which has vowed to show some resolve for catchup spending. However, until we see a stark pickup in expenditure numbers, we could see this outlook fade even more towards the end of the year.”
BMI, a Fitch Solutions firm, also revised its full-year 2023 GDP forecast for the Philippines to 5.3 percent from 5.9 percent following the release of the Q2 figure. The report said the economy is likely to face several headwinds including external shocks.
“The latest growth outturn shows that the Philippines’ economy was weaker than we have originally anticipated,” the report said.
Elevated inflation and higher interest rates have also affected economic activities for the period including capital formation or investments, said GCash Market Education Head Mark Ilao.
He said overseas Filipino workers’ (OFW) remittances boost the Filipinos’ spending power but the question is will it hold?
“Even though there was a drop in local consumption activity over the past few quarters, the low unemployment rate and relatively stable OFW remittances have been keeping the spending power of Filipinos afloat. Going forward, it bears watching if this can hold amidst potential fresh flare-ups in inflation owing to rising crude prices and [the] possible increase in commodity prices due to El Niño,” Ilao said.
He added: “Of course, as the government rationalizes the utilization of its budget for the rest of the year, a rebound in public spending may likewise spur a much-needed turnaround in economic momentum.”
Meanwhile, BPI Lead Economist Jun Neri said the recent GDP report reflected the “widening impact of inflation” on the economy, which justified the need to keep interest rates elevated.
The Bangko Sentral ng Pilipinas kept the country’s benchmark interest rate at 6.25 percent for three straight meetings despite inflation easing for 6 consecutive months.
July inflation decelerated to 4.7 percent. However, it remains above the government target of 2 to 4 percent. (ABS-CBN News)
