Credit Suisse expects slower PH GDP growth in Q2

MANILA, Philippines – Amid weak consumption, Credit Suisse expects the country’s gross domestic product (GDP) growth to slow down to 5.8% in the second quarter of 2017, from 6.4% in the previous quarter.

If this happens, this would be the Philippine economy’s 3rd straight of quarter of downtrend.

In a research note titled, Philippines Macro Wrap: 2Q GDP Likely to Disappoint, Credit Suisse economist Michael Wan said the country’s GDP likely grew slower at 5.8% in the 2nd quarter of the year, from 6.4% in the 1st quarter of 2017. (READ: IMF cuts 2017, 2018 Philippine GDP forecasts)

The GDP growth of the Philippines has been on the downtrend since the 4th quarter of 2016, when it slipped from  7.1% to 6.6%, and to 6.4% in the 1st quarter of the year.

“We expect 2Q GDP to moderate further to 5.8% year-on-year, from 6.4% year-on-year the previous quarter, which will likely be a downside surprise,” Wan said.

He said private consumption and exports as likely to pull down 2nd quarter GDP growth.

“Most of the consumption-related indicators that we track, such as consumer goods imports, industrial production, manufacturing sales and also motor vehicle sales have all moderated in the 2nd quarter,” he added.

The latest data from the Philippine Statistics Authority (PSA) showed imports slipping to 2.5% to $7.06 billion in June from $7.24 bilion in the same period in 2016.

“Timing of the Eid holiday was likely one of the contributors to the weakness, with other regional economies such as Indonesia and Malaysia also seeing a drop in June exports. Nonetheless, other Philippines-specific factors are likely at play too, with the recent Marawi siege potentially contributing to a moderation in agriculture exports,” Wan added.

President Rodrigo Duterte declared martial law in Mindanao on May 23 after members of the Maute Group launched a series of attacks in Marawi City. The imposition of martial law in the region is supposed to last until the end of the year.

Wan said fixed investment likely moderated slightly, with capital goods imports slowing to 5% in the 2nd quarter from 7.3% in the 1st quarter.

He also said government spending showed some pick-up in the 2nd quarter of the year.

On June 22, Credit Suisse lowered its 2017 GDP growth forecast for the Philippines to 6% from 6.4%, amid the projected weak private consumption and slower exports.

“We continue to expect GDP to disappoint consensus in 2017. Today’s data points fit well with our view that full-year 2017 GDP will surprise on the downside in the Philippines at 6%,” Wan said.

The country’s economic managers, through the Development Budget Coordination Committee (DBCC), have retained its GDP growth target of between 6.5% and 7.5% this year. – Rappler.com