DBS flags slowing expansion
GROSS DOMESTIC PRODUCT (GDP) growth will likely ease in the coming quarters as exports and capital formation soften, analysts at DBS Bank said in a report last week, making the economy miss the government’s 6.5-7.5% full-year 2017 target.
The bank said Philippine GDP likely remained relatively slow in the second quarter due to base effects as election-related spending in 2016 gave a one-time boost.
First-quarter GDP expansion disappointed at 6.4%, even as that pace made the Philippines the second- fastest- growing major Asian economy in those three months next to China. News over the weekend quoted Socioeconomic Planning Secretary Ernesto M. Pernia as saying he still expected second-quarter GDP growth — scheduled to be reported on Aug. 17 — to creep closer to 7%, an estimate he first aired in early- May before the government released firstquarter data.
“Normalization has kicked in. GDP growth eased to 6.4% year on year in 1Q17, down from 6.6% in 4Q16, which was already slower than 7.1% in 2Q and 3Q16. The numbers are likely to get softer
in 2Q and 3Q17,” the Singaporebased bank said in a quarterly report.
DBS expects growth to clock 6.4% this year, narrowly missing the government’s 6.5-7.5% goal that was affirmed by economic managers during the interagency Development Budget Coordination Committee ( DBCC) meeting on Friday last week. The DBCC, which sets the official macroeconomic assumptions and fiscal program, kept most targets and forecasts for 20172022 amid expectations that the economy’s sound fundamentals will remain “stable” and that exports will “improve,” coupled with a boost from aggressive state spending.
Economic managers raised exports outlook to 5% growth this year from 2% previously, followed by a 7% climb in 2018 and 9% for 2019.
However, DBS Bank said shipments of manufactured goods — which make up more than 80% of merchandise exports — will likely grow at a slower pace in the months ahead, coming from a seven-year peak of 20.3% in the first quarter. The climb in outbound shipments will likely soften next semester, the bank economists said, noting that the second quarter has started bearing signs of tempering. April marked the fifth straight month of merchandise export growth at 12.1%, even as it slowed from March’s 18.1%.
“Moderation is also under way in investments. Change in inventories slipped back into the negative in 1Q17, after the unexpected surge in 4Q16,” the report read.
“Inventories are now practically flat on a four-quarter rolling sum basis,” the bank economists added, even as they expect overall investment growth at a still “pretty strong” 9.8% for 2017.
Both household and government spending growth should pick up, driven by sustained remittance inflows and retail sales as well as by the current administration’s infrastructure push for the next six years, the bank said.