The Philippine economy likely expanded by 5.8 percent in the third quarter as robust domestic consumption made up for weak external trade, American banking giant Citigroup said.
Citi’s third-quarter gross domestic product (GDP) forecast for the Philippines was slower than the 6.3-percent consensus growth outlook but better than the 5.6-percent year-on-year expansion in the second quarter.
Compared to the second quarter but excluding seasonal factors, Citi projected a 0.7 percent quarter-on-quarter GDP growth in the third quarter.
The government is set to release the third-quarter economic report card on Thursday.
In a research note dated Nov. 20 written by Citi economist for the Philippines Jun Trinidad, it was estimated that domestic demand, excluding investment, likely expanded by more than 6 percent year-on-year in the third quarter led primarily by upbeat consumption.
Local consumer spending, Trinidad said, was boosted by the strong purchasing power of remittances due to a weaker peso against the dollar, incomes attributed to favorable onshore employment and weekly working hours, household access to credit financing, resumption of fiscal spending catalyst and buoyant consumer sentiment despite drought effects.
Trinidad said the real peso value of overseas remittances had grown by 6.1 percent year-on-year in the third quarter, in turn supporting basic and key discretionary spending.
The BSP’s inflation target range for 2015 was 2 to 4 percent. During the BSP’s latest monetary policy meeting last week, key interest rates were kept unchanged.
Trinidad noted that car sales—an indication of upbeat durable goods demand—posted strong third-quarter growth. Despite an export slump and the drought effects, he added that non-farm employment, led by construction jobs and services employment, had supported consumption.
It was noted that third-quarter primary expenditures by the government expanded by 23.8 percent.
On the other hand, Trinidad noted that imports of capital goods—led by power and industrial machinery and telecom equipment—grew by 11.5 percent year-on-year to support private capital expenditures, which expanded by 5.5 percent year-on-year in real terms.