Philippines: Economic growth loses steam in Q2
GDP growth waned to 7.4% year on year in the second quarter, from 8.2% in the first.
Private consumption increased 8.6% in the second quarter, which was below the first quarter’s 10.0% expansion. Elevated inflation in the quarter dampened household spending despite looser Covid-19 restrictions. In contrast, public spending sped up to a 11.1% expansion in Q2 thanks to a rebound in June after the removal of the pre-election spending ban (Q1: +3.6% yoy). Meanwhile, fixed investment growth improved to 13.2% in Q2, from the 11.8% increase recorded in the previous quarter.
On the external front, exports of goods and services growth fell to 4.3% in Q2, marking the worst result since Q1 2021 (Q1: +10.4% yoy). The deterioration came amid a slowdown among the Philippines’ major trading partners. In addition, imports of goods and services growth waned to 13.6% in Q2 (Q1: +15.4% yoy).
On a seasonally-adjusted quarter-on-quarter basis, economic activity declined 0.1% in Q2, contrasting the previous period’s 1.5% expansion. Q2’s reading marked the sharpest contraction since Q2 2020.
Looking ahead, our panelists project GDP growth in the third quarter to decelerate to the slowest rate since the first quarter of 2021. Increased consumer prices will dent private spending, while higher interest rates will curb investment. More positively, renewed post-election public spending should support activity.
On the outlook for the remainder of 2022, ING’s Senior Economist Nicholas Mapa commented:
“[Q2’s] GDP report points to full year growth settling at the lower-end of the government’s 6.5-7.5% growth target. The economy is facing the triple threat of accelerating inflation, rising borrowing costs and a relatively high debt-to-GDP ratio. Faster inflation, which was last reported at 6.4%, should cap overall household spending while rising interest rates are likely to deter investment outlays. Meanwhile, elevated levels of debt could act as a handicap and mitigate the ability of the national government to provide stimulus in the near term.”