By Aubrey Rose A. Inosante, Reporter
THE PHILIPPINE economy expanded by a weaker-than-expected 5.2% within the third quarter, as bad weather hurt agricultural output and government spending, the statistics agency said on Thursday.
Preliminary data released by the Philippine Statistics Authority (PSA) showed Philippine gross domestic product (GDP) grew by an annual 5.2% within the July-to-September period, slowing from the revised 6.4% growth within the second quarter and 6% a yr ago.
This was also the weakest growth in five quarters or because the 4.3% expansion within the second quarter of 2023.
It was also below the 5.7% median forecast in a BusinessWorld poll of 12 economists and analysts.
On a seasonally adjusted quarter-on-quarter basis, GDP expanded by 1.7%, in comparison with 0.7%.
Despite the slower growth, Mr. Balisacan said the Philippines’ third-quarter GDP print was still the second-fastest within the region after Vietnam (7.4%).
“Our economy continues to grow steadily; the most recent GDP figures indicate continuous expansion,” National Economic and Development Writerity (NEDA) Secretary Arsenio M. Balisacan said at a briefing on Thursday.
Philippine GDP growth within the July-to-September period was higher than Indonesia (4.9%), China (4.6%), and Singapore (4.1%).
For the primary nine months of the yr, Philippine GDP growth averaged 5.8%, slower than the 6% print a yr ago. This was barely below the federal government goal of 6-7% growth this yr.
“The economy must grow by at the very least 6.5% to satisfy the federal government’s goal for the last quarter 2024. We remain optimistic that this growth goal is attainable,” Mr. Balisacan said.
He attributed the weaker-than-expected third-quarter growth to the impact of a series of typhoons on the agriculture sector.
Agriculture, forestry and fishing shrank by 2.8% within the third quarter, a reversal of the 0.9% growth posted a yr ago. The sector accounts for around a tenth of Philippine economic output.
“The crops subsector of the agriculture sector posted a year-on-year decline of two.8%, reflecting the impacts of the El Niño phenomenon throughout the planting season and the effects of seven typhoons, along with the Habagat (monsoon), throughout the harvest season,” Mr. Balisacan said.
He noted the combined agricultural damage and losses from the six typhoons within the third quarter and the recent Severe Tropical Storm Kristine has reached P15.8 billion.
At the identical time, the industry sector grew by 5% within the third quarter, slowing from 5.6% a yr ago resulting from base effects. Construction growth slowed to 9% from 14.5% a yr ago.
Services expanded by 6.3% within the July-to-September period, easing from 6.8% in the identical period in 2023.
“The successive typhoons suspended classes and work in government and a few private offices, leading to administrative delays and supply-chain disruptions,” Mr. Balisacan said.
CONSUMPTION RISES
Meanwhile, household consumption, which accounts for over 70% of the economy, jumped by 5.1% yr on yr within the July-to-September period, improving from 4.7% within the second quarter but regular from a yr ago.
“Household spending is especially a vivid spot, growing by 5.1%, faster than the last two quarters resulting from slower inflation. The recent policy rate cuts and reserve requirement reduction could help herald more liquidity to the economy and increase our people’s purchasing power,” Finance Secretary Ralph G. Recto said in an announcement.
Mr. Balisacan noted there was a slowdown in tourism and leisure-related spending as typhoons caused the cancellation of 138 flights within the third quarter.
Gross capital formation, the investment component of the economy, expanded by 13.1% within the third quarter, a turnaround from the 0.3% dip a yr ago.
“The turnaround in investments in durable equipment mainly drove capital formation growth. Private construction also sustained double-digit growth (11.9% from 10.3%), while public construction slowed down (3.7% from 21.7%) resulting from administrative delays and disruptions related to hostile weather conditions,” Mr. Balisacan said.
Growth in government spending sharply slowed to five% within the third quarter from 11.9% within the prior quarter.
‘The climate-related disruption and disturbances that happened within the last quarter have slowed down this (government) spending. And that’s much more so for those which are related to infrastructure,” Mr. Balisacan said.
Exports of products and services contracted by 1% within the third quarter, a reversal from the two.5% growth a yr ago.
Imports of products and services rose by 6.4% within the period ending September, an improvement from the 1.6% decline a yr ago.
“This implied a deep contraction in net exports by 32.6%. Exports of products were pulled down by the sharper decline in electronics products, particularly semiconductors, minus 17.9%,” Mr. Balisacan said.
He said the industry is “undergoing inventory corrections and has yet to satisfy the demands for brand spanking new products in the worldwide market.”
Economic managers are optimistic about faster growth within the fourth quarter as consumer spending is predicted to select up throughout the holiday season.
“We anticipate increases in holiday spending, more stable commodity prices (given low inflation), lower rates of interest, and a strong labor market. Within the areas affected by typhoons, recovery efforts will drive economic activity and, hopefully, construct back higher,” Mr. Balisacan said.
Mr. Recto said he expects private construction to rebound amid lower rates of interest.
Since August, the Bangko Sentral ng Pilipinas (BSP) has lowered rates of interest by 50 basis points (bps) this yr, bringing the important thing rate to six%.
‘HUGE DISAPPOINTMENT’
Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, said the third-quarter GDP print was a “huge disappointment,” even though it was higher than its 4.8% forecast.
“For now, we’re sticking to our forecast that full-year GDP growth will slip to five.4% this yr from 5.5% in 2023, implying that headline growth will proceed to slow within the fourth quarter to around 4.5%,” he said in a report.
Shivaan Tandon, Markets Economist at Capital Economics said the GDP growth is unlikely to be sustained as “slower growth in remittances, fiscal policy and weaker export demand weigh on activity.”
“While the worst might be over for personal consumption within the Philippines, we doubt this pace of consumption growth is sustainable. Admittedly, a continued boost from lower inflation and looser monetary policy should support consumption,” Mr. Tandon said.
Mr. Tandon said downside risks to domestic demand have gone up, because the US dollar is predicted to strengthen.
“This raises the chance that the BSP, which has arguably been more focused on the Fed than other central banks in Asia (barring Bank Indonesia), opts for fewer rate cuts than could have otherwise been the case,” he said.
He noted exports will remain under pressure as global economy slows and the outlook stays clouded by possible tariffs to be imposed by US President-elect Donald Trump.
Alternatively, ANZ Research economists said private consumption will likely further improve, because the unemployment rate fell to three.7% in September and real wages posted growth within the third quarter.
“The resilience within the Philippines’ labor market and regular growth in remittances will moderately buttress personal consumption going forward, in our view. We stress on ‘moderate’ because the regular labor market is partially offset by the necessity for households to rebuild savings as relayed within the household sentiment index,” ANZ Research’s economist Arindam Chakraborty and Chief Economist Sanjay Mathur said.
Nevertheless, the ANZ Research economists said exports will likely remain muted within the near term, amid weak external demand.
“Overall, given the benign inflation outlook over the near term and the softer GDP growth in Q3 2024, we expect the BSP will cut rates by one other 25 bps in December 2024,” ANZ Research said.
BSP Governor Eli M. Remolona, Jr. has signaled a possible 25-bp rate cut in December. If realized, this is able to bring the benchmark to five.75% by end-2024.
