THE PHILIPPINE ECONOMY likely slowed in the third quarter as household spending remained subdued after the central bank cut interest rates in August.
A Business world A poll of 12 economists and analysts last week found average annual gross domestic product (GDP) growth of 5.7% for the period July to September.
If achieved, this would represent a slowdown from the 6.3% growth in the previous quarter and the 6% growth in the third quarter of 2023.
This would also put growth this year at 5.9%, just below the 6-7% target for this year.
The Philippine Statistics Authority (PSA) will release third-quarter GDP data on Thursday (Nov 7).
Most economists surveyed by Business world GDP growth is likely to have slowed as high inflation may have dampened household spending in the third quarter.
“On the demand side, household consumption was still the main driver of growth, although it may have remained subdued due to persistent price pressures,” said Chinabank Research, which forecast GDP growth of 5.7% in the third quarter.
InFInflation accelerated to a nine-month high of 4.4% in July, but slowed to 3.3% in August. InFInflation fell further to a four-year low of 1.9% in September, falling below the 2-4% target. In the first nine months, consumer price growth averaged 3.4%, which is also the central bank’s forecast for this year.
“We expect growth to cool to 5.7% year-on-year by the third quarter of 2024 as government spending, both in consumption and investment, has declined. Although the central bank started its easing cycle during the quarter, we do not think the change in monetary policy has had an impact on the economy. [the third-quarter] growth,” economist Aris D. Dacanay of HSBC ASEAN (Association of Southeast Asian Nations) said in an email.
The Bangko Sentral ng Pilipinas (BSP) started its easing cycle with a 25 basis points (bp) cut at the August 15 meeting, followed by another 25 bp cut at the October 16 meeting. This brought the target reverse repurchase rate to 6%.
“Private consumption will remain subdued as it will take some time for the recent interest rate cuts to be implemented Ftrickling through the economy,” said Sarah Tan, economist at Moody’s Analytics.
Patrick M. Ella, an economist at Sun Life Investment Management and Trust Corp., said GDP likely grew 6% in the third quarter. This comes as he expects household spending to grow 5%-5.5% in the period ending September, compared with 4.6% in the second quarter.
He noted that the effect of the rate cut was visible in “both improved liquidity and a stronger expectation of lower future inflation.”
Angelo B. Taningco, vice president and head of the research division at Security Bank Corp., said third-quarter growth may also have been driven by “healthy” government spending, “resilient” capital formation and broader trade development.FIT
Government spending in the US has increased by more than a tenth to 4.26 trillion euros Ffirst nine months, violating the P4.22 trillion program for that period.
So far this year, the government has already disbursed nearly three-quarters of its revised P5.8 trillion spending program.
“Continued public and private construction activities continued to support capital formation growth,” Chinabank Research said.
Ser Percival K. Peña-Reyes, director of the Ateneo Center for Economic Research and Development, said in an email that construction, transportation and warehousing, accommodation and food service activities are also likely to drive GDP growth to 6 .5% in the third quarter. .
However, some economists noted that adverse weather conditions during the July to September period could negatively affect agricultural production, which accounts for about 10% of GDP.
“With agricultural production challenged by the recent typhoons and heavy monsoon rains, non-farm GDP, driven by private sector spending, would likely do much of the heavy lifting to boost GDP in the third quarter of 24 year-on-year growth of 6.2%,” said Ruben Carlo O. Asuncion, head of the company. economist of Union Bank of the Philippines, said.
Chinabank Research said agriculture was likely to remain a “constraint” on growth in the third quarter as output fell due to bad weather.
For example, the impact of Super Typhoon Carina and the strengthened southwest monsoon have caused approximately €4.73 billion in agricultural damage, aFhitting farmers and Fiser people, mainly in Luzon.
The figures for agricultural production for the third quarter will be announced on Wednesday.
“On the supply side, services continued to drive the economy, but may have been muted by subdued consumption,” Chinabank Research said.
Mr. Asuncion also noted that the recent disinflation, strong service sector employment growth in August and robust manufacturing “are clear signals of positive macro catalysts during the quarter.”
OUTLOOK
“Overall, we expect the Philippine economy to grow 5.9% in 2024,” said Ms Tan of Moody’s Analytics. “That will be just below the government’s target of 6% to 7% for this year, but will again outperform many of its regional peers in terms of growth.”
Harumi Taguchi, chief economist at S&P Global Market Intelligence, said they expect “lower borrowing costs and softer financial conditions will improve sentiment among households and businesses and boost credit growth in 2025.”
“Overall economic performance is expected to continue to rise, even as the impact of previous rate hikes will suppress private sector investment. While robust infrastructure spending will boost economic activity, a steady increase in remittances will support private consumption,” Taguchi said.
John Paolo R. Rivera, senior research fellow at the Philippine Institute for Development Studies, said he remains optimistic about the rest of the year as an increase in remittances ahead of the holidays is expected to boost consumer spending.
HSBC’s Mr Dacanay said he expects household consumption growth to “finally change direction for the better, as inFlation signiFrelaxed significantly in the past quarter.”
“Services exports were also likely to remain undisturbed, with the BPO (business process outsourcing) sector leading the way, while goods exports were likely to hold up,” he said. — Pierce Oel A. Montalvo