2nd quarter GDP growth seen at 6.4%

THE PHILIPPINE economy likely grew at a slower pace in the second quarter compared to the first when spending ahead of the presidential elections peaked.

Based on market consensus, second-quarter gross domestic product (GDP) likely expanded by 6.4 percent year-on-year, slower than the 6.9 percent annual growth posted in the first three months.

The second-quarter GDP report is set to be released this Thursday.

Although slower than the annual growth seen in the first quarter, the projected expansion for the second quarter was still higher than the 6.2-percent trend growth from 2010 to 2015.

In a research note, Citigroup projected the country’s second-quarter GDP growth at 6.5 percent.

Citigroup said the election uncertainty failed to derail robust domestic demand.

Even with election spending tapering off, Citi said real purchasing power of remittances from overseas Filipinos as well as business process outsourcing (BPO) employment boosted consumption.

For his part, BDO Unibank economist Jonathan Ravelas projected a higher growth rate than market consensus.  He said the second-quarter expansion would likely be at 6.7 percent.

“Election-related spending and favorable inflation picture could have contributed to a stronger GDP number,” Ravelas said.

Soon after the elections, the government’s primary expenditures fell. The budget deficit narrowed to P45.2 billion in June from P72.7 billion in the same period last year largely due to a 6.5-percent decline in expenditures to P220.8 billion while revenues were up by 7.3 percent to P175.6 billion.

Aside from the preceding year’s high base, we attribute the drop in primary expenditures to an imminent slowdown of non-essential program/project spending as the outgoing Aquino administration prepared for the transition to the new government following Duterte’s May election victory. Projects that were not started earlier in the year could have been affected by the three-month election ban starting late March,” Ravelas said.

The slower second-quarter primary fiscal expenditures, Citi said in a separate research note, could preview a slower GDP pace.

“As gleaned from robust, demand-driven, non-oil import data, private spending should lead second-quarter GDP growth past 6 percent year-on-year,” the research said.