Philippine economy posts better-than-expected Q1 growth, but slower

The Philippine economy opened the year with a slower growth, albeit better than consensus amid favorable base effects and a resilient consumer spending.

The Philippines’ gross domestic product grew 6.4% year-on-year in the first three months of the year, the Philippine Statistics Authority reported Thursday. This was slower compared to the annual growth rate of 7.1% recorded in the fourth quarter of 2022, and the 8.0% expansion recorded a year ago.

But quarter-on-quarter, the economy grew 1.1%. The latest year-on-year outturn was also better than the median estimate of 6.1% growth based on a BusinessWorld poll of 23 economists.

Economic managers are eyeing the Philippine economy to grow at a clip of 6-7% this year. Consumer spending kept the domestic economy afloat for most of 2022, expanding 7.6% on an annual basis despite a brutally-high inflation.

However, data showed household consumption grew at a slower pace of 6.6% on-year in the first quarter, compared to the 7% expansion in the preceding three months.

The latest GDP reading benefitted in part from base effects, as the domestic economy was still finding solid ground as mobility restrictions remained in place. This was the assessment of Nicholas Antonio Mapa, senior economist at ING Bank in Manila.

‘Growth will likely moderate… supported by still robust consumption with the YoY reading benefiting from a favorable base,’ he said in a Viber message ahead of the data release.

For Mapa, consumer spending took the cudgels of maintaining the economy’s growth momentum.

‘Rate hikes may cap bank lending and investment outlays as a whole while government spending should be slowed by concerns about the debt levels,’ Mapa added.

Domini Velasquez, chief economist at China Banking Corp., agreed with Mapa’s assessment that growth slowed down. She expects this trend to persist in the coming months.

‘Moving forward, we expect GDP in the coming quarters to print lower without the momentum from the pandemic reopening,’ she said in a Viber message

As it is, Velasquez noted that the domestic economy will hit an inflection point, as the Bangko Sentral ng Pilipinas’ aggressive interest rate hikes take hold.

‘For full year 2023, we maintain our view that GDP growth will likely fall below or nearer the lower end of the government’s 6.0-7.0% target,’ Velasquez added.