3rd quarter GDP growth seen at 6.6%
The Philippine economy likely grew at a slower 6.6 percent year-on-year in the third quarter due to a temporary fiscal drag inherent in the transition to a new administration, an economist from Citigroup said.
In a research note dated Oct. 20, Citi Philippines economist Jun Trinidad said the national government’s budget surplus of P32.6 billion for the month of August had flagged the post-election slowdown in disbursements.
Increase in revenues
The August budget surplus marked a 116.8-percent year-on-year growth, driven by the 18.6-percent increase in revenues that outpaced the 9.5-percent rise in expenditures.
While a single month’s data did not make for a conclusive trend, the economist said the start of the rainy season coupled with a government in transition did not bode well for sustaining the strong 16.6-percent year-on-year growth in primary expenditures in the first semester.
“There’s anecdotal evidence that many appointments to senior positions in several departments and government agencies have not yet been signed by the President (Rodrigo Duterte) as of September, which reinforces this fiscal drag,” Trinidad said.
GDP grew
Such temporary drag, the economist said, would certainly weigh on the third-quarter Philippine gross domestic product (GDP), which could yield a slower growth of 6.6 percent from 7 percent in the second quarter. In the first six months, GDP grew by 6.9 percent, making it one of the fastest-growing economies in Asia.
The caveat to this forecast would be an upside surprise from private spending led by consumption, given the strong demand for consumer durables like cars, alongside a possible lift from strong remittances and lingering effects of upbeat private investments.
In the case of consumer durables, it was noted that third-quarter car sales surged 25.5 percent while the purchasing power of households supported by overseas remittances was up 5.5 percent given the depreciation of the peso against the dollar from July to August.
“On balance, we continue to believe overall GDP gains would ease off as third-quarter domestic demand, which is likely to slow down, would be curtailed by still-elevated net imports,” Trinidad said.
