Economic growth may have improved slightly in the second quarter of the year although the drag from weak demand for Philippine exports continues to prevent the country from reaching full speed.
Singapore’s DBS Bank said recent improvements in government spending likely provided a lift in output in April to June. The strongest of the headwinds faced by the economy may have come from weak external demand.
“We had always expected export growth to moderate quite markedly, compared to the previous two years, but the pace of moderation is slightly faster than our earlier forecast,” DBS economist Gundy Cahyadi said in a note to clients.
This comes ahead of next week’s government release of gross domestic product (GDP) data for the second quarter. DBS expects the number to be around 5.7 percent.
Although faster than the historical average of below 5 percent—as well as the first quarter’s three-year low of 5.2 percent—the projected second quarter performance still falls far short of the level the government prefers.
Following the first quarter’s disappointing result, economic managers said GDP would have to grow an average of 7.7 percent from April to December if the full-year target of at least 7.5 percent is to be met.
Cahyadi said the slowdown in exports was not unique to the Philippines. China’s recent slowdown and tepid conditions in major markets like the Europe and Japan have dragged down the performance of manufacturers across the region.
Philippine merchandise exports declined by 3.3 percent to $5.3 billion in June 2015 on account of lower revenues from total agro-based and mineral products, the state statistics authority reported this month.
Domestic sources of growth such as consumer spending and private investment remain stable. The DBS economist said the successful execution of the government’s spending program would determine how much growth can be achieved for the year.
For all of 2015, DBS expects the Philippine economy to grow by 6 percent, accelerating to 6.2 percent the year after.
Public disbursements in June totaled P236.2 billion, expanding by 17 percent compared to June 2014 and 24 percent above program, latest data showed.
“Note that we have been adjusting our GDP growth forecasts for almost all countries in the region, excluding the Philippines for now,” Cahyadi said.