AFTER two quarters of lower-than-expected gross domestic product (GDP) growth this year, the Philippines is headed toward a “disheartening” third-quarter print anew, a local economist said.
In a recent analysis, ING Bank Manila economist Nicholas Antonio Mapa said recent economic indicators are pointing to a disappointing third-quarter number that is threatening to pull the overall 2019 annual GDP even lower than earlier expected.
Mapa cited the continued contraction in capital goods and pullback in construction materials, which point to a potential weak print for capital formation in the third quarter of 2019. This, coupled with base effects from last year’s capital formation—which grew at 19.3 percent—will “likely be a daunting hurdle” for the economy, according to Mapa.
The economist also cited lackluster road vehicle sales, with the August print showing a 2.4-percent contraction.
The decline—which came more than a year after the excise tax buying spree—shows that households “are bearing the brunt of recent rate hikes as well, with the once-promising investment-driven growth strategy abruptly ended,” the economist said.
As such, Mapa said the growth for 2019 is resting solely on the back of the household consumer.
“Inflation stalling to sub-1-percent levels should give households a fighting chance to pull off rally all the more with BSP Governor [Benjamin] Diokno pledging further progrowth policies after rattling off a total of 75 bps worth of rate cuts to restore some semblance of investment momentum,” Mapa said.
“While investment and government spending remain sidelined by separate ‘injuries’ that slowed them down in the first half, household spending will be tasked to hold the fort and salvage growth of 6 percent for 2019 with a significantly better second-half performance for the year,” he added.
For the local currency, Mapa said the August trade numbers—which showed a surprise contraction of the trade gap—will help bolster the local unit given expectations for softer demand for hard currency ahead of the deluge of remittances in time for the holidays.
The World Bank and Asean+3 Macroeconomic Research Office (Amro) recently downgraded growth prospects for the Philippines in 2019 and 2020, citing external headwinds emanating from the ongoing US-China trade spat.
The World Bank now expects the local economic growth to average at 5.8 percent while Amro’s forecast is down to 6 percent for the year.