Q2 growth seen still below 6%

As government underspending on public goods and services persisted due to the delayed implementation of this year’s budget, economic growth likely remained below 6 percent in the second quarter even as the pace was seen faster than the first-quarter’s 5.6 percent, which was a four-year low.

Of the 11 economists polled by the Inquirer last week, 10 projected a gross domestic product (GDP) growth of 5.7 to 5.9 percent for April to June.

The government will report on the second-quarter GDP performance on Thursday (Aug. 8).

The lone economist who has projected that GDP growth will hit 6 percent in the second quarter was Rizal Commercial Banking Corp.’s Michael Ricafort. He attributed his more bullish outlook to “the sustained decline in both inflation and interest rates that could boost growth in consumer spending (which accounts for about 70 percent of the economy) and investments/capital formation.”

“Narrower trade deficits/net imports in recent months would also lead to some pickup in GDP growth in the second quarter,” Ricafort added.

Ateneo de Manila University economics professor Alvin P. Ang, Security Bank Corp. assistant vice president and economist Robert Dan Roces, and Barclays’ Angela Hsieh projected a 5.9-percent GDP growth in the second quarter.

“Government spending was at surplus in April and May and reverted to deficit only in June, suggesting that the effects of the delayed budget have crept into the quarter. Meanwhile, growth in the imports of capital goods between April and May was relatively flat (by 0.03 percent year-on-year), which suggests tepid developments in the ‘Build, Build, Build’ infrastructure program,” Roces said.

“Overall, this means that second-quarter growth will be hard pressed to reach or exceed 6 percent, with lackluster government spending continuing to be the main drag despite a rebound in private consumption because of tapering inflation,” Roces added.

ANZ Research economist Mustafa Arif, Banco De Oro Unibank Inc. chief market strategist Jonathan Ravelas, Bank of the Philippine Islands vice president and chief economist Emilio Neri Jr., Capital Economics Asia economist Alex Holmes and ING Bank Manila senior economist Nicholas Antonio Mapa shared the same GDP growth forecast of 5.8 percent.

Neri pointed to “weak exports … and investment slowdown likely due to tight liquidity,” while Mapa noted that “car sales have been relatively flat” during the second quarter.

Arif noted that “cement sales remain lackluster, suggesting that investment is yet to pick up materially.”

Maybank economist Zamros Bin Dzulkafli and Nomura economist Euben Paracuelles both projected 5.7 percent, the lowest end of the forecasts.

“The current US-China trade war keeps external demand weak” for Philippine exports, Zamros noted.

The government targets a 6- to 7-percent GDP growth this year.

To make up for the below-target GDP expansion in the first quarter, Socioeconomic Planning Secretary Ernesto Pernia said that “the economy must grow 6.1 percent on average over the next three quarters to reach our full-year growth target.”

To recall, President Duterte signed the P3.7-trillion 2019 national budget only in mid-April as the two houses of Congress earlier squabbled over “pork” funds, such that the government had underspent some P1 billion a day between January and April.