But full-year forecast barely hitting target
Manila, Phillipines — The strong growth momentum in the third quarter is likely to be sustained with the gross domestic product (GDP) expansion accelerating further in the fourth quarter.
Security Bank economist Robert Dan Roces said the country’s GDP growth is seen further rising to 6.5 percent in the fourth quarter, bringing the full year expansion to 5.95 percent.
The country’s GDP growth picked up to 6.2 percent in the third quarter after slumping to a four-year low of 5.5 percent in the second quarter from 5.6 percent in the first quarter.
Roces said the country’s GDP should grow to 6.7 percent to meet the low end of the six to seven percent target set by economic managers for 2019.
“We think that 6.7 percent might be too steep considering base effects year-on-year, and thus we retain our Q4 growth forecast at 6.5 percent, with full year average now at 5.95 percent,” Roces said.
Roces said benign inflation coming into the fourth quarter would stimulate consumption even further amid the easing cycle by the Bangko Sentral ng Pilipinas (BSP).
The BSP’s Monetary Board has slashed interest rates by 75 basis points as inflation eased to a 43-month low of 0.8 percent in October from 0.9 percent in September, bringing the average to 2.6 percent in the first 10 months of the year.
“This higher consumption will again push growth above the 6 percent threshold. Strong public spending will be boosted by the recent policy cuts’ lag effects, and validates the BSP’s prudent pause on monetary easing for the rest of the year,” Roces said.
Nicholas Mapa, senior economist at ING Bank Manila, said household consumption would continue to deliver given that inflation even in the fourth quarter remains largely benign.
Mapa said government expenditure on operating and maintenance as well as public construction would surge to close out the year.
In order to complete the growth picture however, Mapa said the country needs to see a positive contribution from the investment picture that has languished in contraction for two straight quarters.
On the other hand, Mapa said monetary easing and improving investor sentiment would likely lift capital formation to close out the year with an accelerated pace of capital formation growth expected in 2020 as recent BSP rate cuts feed into the economy.
“With the 6.2 percent growth print in 3Q, we expect the Philippines to continue to chase full year growth of 6 percent to keep the string of strong growth alive,” Mapa said.
Noelan Arbis, economists at British banking giant HSBC, said there is marginal upside risks to its full-year growth of 5.7 percent for 2019 after a stronger than expected GDP growth in the third quarter.
“The Philippine economy is back in stride, and we expect the pace of growth to pick-up again in 4Q,” Arbis said.
HSBC sees growth picking up to 6.3 percent in 2020, supported by a sustained private consumption and fixed investment growth outlook.