Q1 growth seen at above 6% on strong consumer, gov’t spending

The economy likely grew by more than 6 percent in the first quarter, faster than the 5-percent expansion a year ago, on the back of robust consumer and government spending ahead of the elections, economists said.

DBS Bank Ltd. economist Gundy Cahyadi said the gross domestic product (GDP) likely grew by 6.3 percent in the first quarter even as export growth prospects remained “bleak.”

The government reported on Wednesday that first-quarter exports dropped by 8.4 percent to $13.1 billion, as shipments continued to decline for the 12th consecutive month in March.

“That export growth is weak shouldn’t be surprising though. The global economy is not growing as fast as many had though earlier—look at how the growth numbers are down for key export destinations. Yet, as far as GDP growth momentum is concerned, we are not worried at all,” Cahyadi said.

Cahyadi noted that “most of what’s driving the economy comes from domestic demand.”

“As long as consumption and investment growth stays strong, we remain optimistic that GDP growth will return to 6.1 percent this year. That there has been a frontloading of investments before this year’s elections seems to have caused the spike in imports in the first quarter. And imports of capital goods are still growing strong, indicative of sustained growth in domestic investments,” Cahyadi added.

The government will announce the first-quarter GDP growth figure Thursday next week.

In its weekly note to clients, Metrobank Research said it was expecting first-quarter economic growth at 6.1 percent.

“Growth drivers will be still solid consumption spending (amid low inflation and interest rates), sustained pickup in government (on the back of election spending), steady services sector and rebound in the manufacturing sub-sector,” research analyst Pauline May Ann E. Revillas said.

The latest government data which was released on Tuesday showed that end-February expenditures on public goods and services jumped by 14 percent year-on-year to P359.3 billion.

“The main drag to GDP is expected to still be external trade amid the slump in exports during the quarter. Exports were largely affected by the stronger US dollar and the weak demand from some of the Philippines’ major trading partners, especially China. On the supply side, the agriculture sector is seen to remain in the red amid the impact of El Niño on crop production,” Revillas said.

Metrobank Research sees a full-year GDP growth of 6.3 percent, faster than 5.8 percent in 2015 but below the government’s 6.8-7.8 percent target range for 2016.

“Government spending growth is seen to be sustained until at least the first half as the government frontloads its budget expenditures. Consumption spending will remain solid amid the still soft commodity prices and low interest rates. Election spending is expected to support key services such as transportation, communication, and storage, business activities, and retail trade. A slight pickup in manufacturing is also seen as exports of electronics slightly improve. The agriculture sector will remain weak as El Niño extends to the first half,” Revillas said.

For ING Bank Manila senior economist Joey Cuyegkeng, first-quarter GDP likely grew by 6.6 percent.