Stronger H2 growth seen despite drop in business confidence

Metropolitan Bank & Trust Co. (Metrobank) said the country’s economic expansion would pick up in the second half despite business confidence dropping to its lowest level in three years for the third quarter.

Pauline May Ann Revillas, research analyst at Metrobank, said the bank still expects a better second half economic performance on positive expansions of all economic sectors.

“Research sees full-year average 2017 growth to come in at 6.6 percent, supported by the continued rebound in the agri sector, robust industry sector, and solid service sector,” she said.

The country’s gross domestic product (GDP) growth increased pace to 6.5 percent in the second quarter from 6.4 percent in the first quarter, bringing the average growth to 6.4 percent in the first half of the year.

Economic managers see the GDP growth ranging from 6.5 to 7.5 percent this year after election-related spending boosted the expansion to 6.9 percent last year from 5.9 percent in 2015.

Revillas said some of the factors that dampened expectations for the third quarter are seasonal and are seen as transitory.

She was referring to the results of the Business Economic Survey for the Third Quarter of the Bangko Sentral ng Pilipinas wherein the overall confidence index dropped to 37.9 percent for the third quarter from the previous quarter’s 43 percent.

“The less upbeat outlook was attributed to factors, some of which are: slowdown in business activities during the rainy season, closed milling season, closed fishing season in Davao Gulf, Marawi crisis and martial law in Mindanao, weak peso, damages from the July earthquake in Visayas,” she said.

Across sectors, the analyst explained it was only the industry sector that bucked the overall decline amid the more buoyant manufacturing subsector.

Respondent firms under the manufacturing subsector cited improved market strategies and new product lines as the factors behind their more upbeat sentiment.

For the quarter ahead, Revillas said the outlook turned more positive amid expectations of uptick in demand due to the holiday season, sustained rollout of government infra projects, favorable weather condition, and positive impact of the proposed tax reform program.