Economists see faster growth in Q3

The economy likely grew at a faster pace in the third quarter as robust government expenditures on public goods and services, especially infrastructure, offset the impact of higher prices on consumer spending.

Seven economists polled by the Inquirer last week projected the gross domestic product (GDP) to have grown by more than 6.1 percent during the July-to-September period, faster than the three-year low 6-percent expansion posted in the second quarter.

Economic managers had blamed the slower-than-expected second-quarter growth rate to high inflation as well as the implementation of a number of environmental policies that affected the agriculture and services sectors, including the six-month closure and rehabilitation of top tourist destination Boracay Island.

The government will announce the third-quarter GDP performance on Thursday.

But Bank of the Philippine Islands vice president and chief economist Emilio Neri Jr.’s forecast was only 5.9 percent year-on-year growth during the third quarter as “net exports will continue to be a drag owing to elevated oil prices and the surge in capital goods just as merchandise exports remain soft.”

“Slowing agricultural output and decelerating electricity sales also indicate sustained softness in third-quarter production. Thus, despite sustained strength in government and private sector capital outlays providing a boost for construction and the trading sectors in the third quarter, weaker demand for nonfood and nonfuel consumer items likely remained a damper on overall spending during the quarter, more so that the dollar value of cash remittances continue to slow down,” Neri said.

The highest forecast, meanwhile, was 6.7 percent by Land Bank of the Philippines market economist Guian Angelo Dumalagan, citing “faster gains in most spending components.”

“Government spending picked up, along with investment spending, supported by the ‘Build, Build, Build’ program of the government. The recovery in exports also contributed to faster growth. While consumption spending improved, its rate of increase was tempered by the surge in consumer prices, which weighed down on households’ purchasing power. On the production side, the services and industry sectors remained as growth drivers, offsetting the downward pull coming from the agricultural sector,” Dumalagan explained.

Oxford Economics senior economist Beatrice Tanjangco projected 6.5-percent growth in the third quarter as rising inflation should still weigh on private consumption and overall domestic demand, but the ongoing government infrastructure drive should provide some support, with faster public sector investment and a pickup in government consumption.

Rizal Commercial Banking Corp.’s Michael Ricafort sees third-quarter GDP growth within the range of 6.3-6.5 percent, partly with election-related spending kicking in ahead of the midterm elections in May next year.

ING senior economist Nicholas Antonio Mapa’s forecast was 6.3 percent, but cautioned that “we may have to see the other sectors of the economy ‘step up to the plate’ with consumption seen to take a backseat with households bearing the double whammy of accelerating inflation and elevated borrowing costs after Bangko Sentral ng Pilipinas hiked [interest rates by] 150 basis points in only a matter of months.”

Moody’s Analytics economist Katrina Ell said her projection of 6.3-percent third-quarter expansion reflected drag from slower manufacturing, although partially absorbed by the “still upbeat” performance of investments as well as exports.

For Ateneo de Manila University economics professor Alvin Ang, the economy likely grew 6.1 percent during the July-to-September period, “as consumption slowed down and the government cannot fully fill up the slack.”

“Also, the storms that passed us have further weakened agricultural output,” Ang added.

As for Maybank Investment Bank group chief economist Suhaimi Bin Ilias, GDP growth for the entire second half would likely average 6.3 percent, the same as in the first semester.