The Philippine economy is expected to grow slower in the second semester, especially with sluggish demand for Philippine exports and a “still small” budget deficit as of July, according to the DBS Group.
The National Statistical Coordination Board last week reported that gross domestic product grew by 5.9 percent year on year in the second quarter, bringing the first-semester growth to 6.1 percent.
The NSCB said the services sector remained the main driver of growth while manufacturing showed sustained growth and construction rebounded.
On the other hand, the NSCB said the composite leading economic indicators for the third quarter eased slightly after improving continually during the previous four consecutive quarters, indicating “a possible slowdown of economic activity” in July to September.
DBS said in a research note to clients that the outlook in the second semester was mixed, although monetary authorities have plenty of space to intervene.
“Inflation, although likely to tick up due to food price pressures, should still remain on the low end of the central bank’s target of 3 to 5 percent,” the financial service provider said. “This implies that further monetary easing is certainly possible.”
The Singapore-based group also observed that despite improving disbursements, fiscal spending remained slow with the budget deficit reaching just P73.3 billion in the seven months to July.
“Things are not as sanguine on the external front and this will be reflected in the export numbers,” DBS said. “In particular, electronics exports are still the mainstay and a sustained improvement in this segment appears unlikely.”
DBS forecasts a full-year growth of 5.3 percent for the Philippines, saying that the final figure will be anchored on a strong first half even if growth slows in the second half.
Earlier, DBS said non-electronics goods, which helped shore up exports in the second quarter following a slack in electronics shipments, might support continued economic growth for the rest of the year.
“The biggest risk to growth in the second semester is slowing external demand and that has been factored into our full-year growth forecast,” DBS said. “It is far from clear that the surge in non-electronics manufactures exports can be maintained and electronics exports may provide a better signal of external demand.”