PH growth likely slowed to 6% in Q1, says Citi

MANILA, Philippines—The Philippine economy likely grew at a slower pace of 6 percent year on year in the first quarter, despite the much-anticipated surge in spending ahead of the mid-term elections, global banking giant Citigroup said.

Citing weaker-than-expected external trade statistics early in the year, Citigroup projected a softening in the country’s gross domestic product (GDP) growth.

Its growth forecast of 6 percent is slower than the 6.4 percent expansion posted in the first quarter of 2012 and the 6.8 percent growth seen in the fourth quarter of last year.

The National Statistics Coordination Board and National Economic and Development Authority are set to release the first-quarter economic data this Thursday.

In a study dated May 24 written by economist Jun Trinidad, Citi said the slumping first-quarter import data suggested that growth had less import content. Non-oil imports fell by 3.9 percent year on year in the first three months despite upbeat domestic spending led by primary fiscal expenditures, the report noted.

It was pointed out that the import drag had come from the first-quarter export decline (-6.2 percent year on year) while mirroring less import-intensive first-quarter private spending.

Citi attributed the less import-intensive private spending to waning capital expenditures, a key component of real investments.

Import payments of capital goods dropped by 9 percent year on year in the first three months of 2013 following the 15.5-percent year-on-year growth in the fourth quarter of last year.

“From global uncertainties that may have created slack in some industries, exports markets particularly in intra-Asia (excluding Japan) were less robust to PPP (public-private partnership) project delays onshore and effects, aggregate spending didn’t have strong import content,” the research said.

The research said the first-quarter import drop should still enable the country to post a 6-percent year-on-year GDP growth.

“But lacking import content, we probably missed out on investment-driven growth which sustains the jobless growth condition,” the report said.

“Mindful of this, we expect first-quarter GDP growth won’t be in a position to enable the Philippine peso to shed recent weakness,” the report said.

Meanwhile, Citi said in a separate research note that the upbeat second-quarter business sentiment based on the latest quarterly Bangko Sentral ng Pilipinas survey  still had an unclear link to corporate earnings.

In the first quarter, the report said the corporate earnings link with business sentiment wasn’t strong, with business sentiment only mildly upbeat, only to be followed by robust growth in corporate earnings of 25 percent year on year, led by financials (100 percent year on year).