Philippines economic growth likely to remain robust in Q3 on upbeat household spending

Economic growth in Philippines is expected to have risen during the third quarter of this year, following upbeat household spending, mainly owing to the reasonably lower rate of inflation in the country.

Gross domestic product (GDP) haves outperformed market expectations in both 1Q and 2Q. The election effect turned out to be much stronger than anticipated. 7 percent private consumption growth and 20 percent investment growth was enough to lift overall GDP growth to 7 percent in 1H16. Robust domestic demand has offset any drag from slower export growth in the period.

As normalisation typically follows the election, GDP growth was supposed to ease markedly in 3Q. But the new administration has actually stepped up its spending almost immediately after coming into office. Fiscal spending rose 14.4 percent y/y in 3Q, even faster than actual 13.9 percent in 1H16, DBS reported.

Imports of capital goods continue to chalk strong growth, at 22.7 percent in 3Q. As this is an important yardstick for investment growth, it does suggest that investment growth might have expanded at circa 15 percent in the period.

"The detailed breakdown of the 3Q GDP data is important to figure out if this strong GDP growth momentum may continue well into 2017," DBS commented in its latest research note.