‘Economy may hit speed bump in Q2’

MANILA, Philippines — The economy may hit a speed bump  in the second quarter after a stronger-than-expected performance at the start of the year as public and private spending likely slowed due to the general elections.

In its latest economic monitor, international think tank Pantheon Macroeconomics said it expects the Philippine economy to post a slower  gross domestic product (GDP) growth for the April to June period after a stronger-than-expected first quarter expansion.

Pantheon Emerging Asia chief economist Miguel Chanco said the second quarter would be a wake-up call, as the election slams the brakes on government spending and investment.

For the second quarter, Pantheon  said the Philippine economy may expand by 8.1 percent, slower than the 12 percent recorded in the same period last year. On a quarterly basis, however, GDP may contract by 0.3 percent.

The government just reported that first quarter GDP expanded by 8.3 percent, beating market expectations and putting the economy back to pre-pandemic levels.

The strong performance was driven by private consumption despite the Omicron surge in January and the sharp upswing in inflation toward the end of the quarter.

“The biggest second quarter pressure point, consumption aside, will be government spending, which usually suffers in the quarter after a general election is held,” Chanco said.

“We reckon that the pullback this time will be particularly painful, with expenditures still running well above their long-run uptrend, due partly to the big increase in commitments since the pandemic started,” he said.

Chanco said business spending likely took an election-related pause as well, which adds to the weakness of the second quarter.

While investment rose by 5.2 percent in the first quarter, businesses are expected to remain on a wait-and-see mode through most of the second half of this year following the landslide victory of presumptive president Ferdinand Marcos Jr.

Marcos has so far not provided his economic agenda.

“Spending intentions over the long run remain depressed. All told, private consumption in the current quarter is a campaign, so policy priorities won’t emerge until his administration starts to take shape in the third quarter,” Chanco said.

Nevertheless, Pantheon raised its 2022 GDP forecast for the Philippines to 5.6 percent from  the earlier target of 4.5 percent.

However, the revised assumption is still below the seven to nine percent target of the government.

Chanco said s catch-up in spending to the pre-pandemic level is officially over, so the continuation of above-average gains enjoyed since the middle of last year can no longer be taken for granted.