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The Philippines' economy expanded faster than market projections in the second quarter of this year. The economic growth accelerated to 7 percent year-on-year, as compared with market projection of between 6.5 percent and 7 percent. However, the first quarter growth was revised downwardly to 6.8 percent year-on-year from the initial reading of 6.9 percent.
On the expenditure front, Philippines recorded consumer spending growth of 7.3 percent year-on-year, helped by election-related spending. Meanwhile, goods trade deficit narrowed even as growth in imports of goods accelerated to 22.9 percent year-on-year in the second quarter from 21.5 percent in the first quarter of 2016.
On the other hand, surplus in trade services narrowed due to the higher growth in services exports. From the production perspective, the agricultural sector shrank 2.1 percent year-on-year in the second quarter, a rebound from the contraction of 4.4 percent in the first quarter.
Industrial sector’s growth slowed from 9 percent in the first quarter to 6.9 percent in the second quarter, Services sector growth rebounded, growing 8.4 percent year-on-year. A solid recovery in the trade and repair drove the growth in services sector.
On a quarter-on-quarter basis, Philippines’ economy grew 1.8 percent seasonally adjusted, as compared with 1.1 percent in the previous quarter. At almost 70 percent of GDP, consumption would be a vital growth support, said ANZ in a research report.
“For now, we maintain our 2016 GDP growth forecast at 6.1 percent y/y, as growth is likely to ease in H2. We expect the support on consumption growth from the May elections to fade and return to a long term growth rate of 5.5-6.0 percent y/y”, added ANZ.
The developments on the 2017 government budget are being watched closely, particularly the funding plans’ evolution. The Duterte administration is likely to increase the government budget to PHP 3.35 trillion in 2017, and the deficit target to 3 percent of GDP. The Philippine central bank is expected to keep its policy tools on hold through 2016. It is likely to tighten its policy in the second quarter of 2017, stated ANZ.
