Economists expect Philippines to grow slower than 6.4% in Q2

MANILA, Philippines – Citing the performance of exports, public spending and remittances, local economists expect the Philippines to post a slower economic growth in the second quarter after growing 6.4% in the first quarter of 2012.

Former Budget Secretary Benjamin Diokno expect second quarter Gross Domestic Product (GDP) growth to slow to 4.5% while University of Asia and the Pacific (UA&P) economist Cid Terosa said growth may slow to 6% to 6.3%.

Diokno said with this, it is likely that full-year growth would be below government expectations at 4.9%. The government forecasts a growth of 5% to 6% this year.

“The surprising first quarter GDP growth of 6.4% is a hard act to follow,” Diokno said. “It is not clear where strong growth might come from in the second quarter of 2012.”

The first quarter growth put the Philippines on the radar of foreign investors since this performance was the second highest in the region, next to China’s.

Growth drags

Terosa said the main growth drags in the second quarter would include slower export growth and the still weak global economy.

Diokno agreed and said the global economic outlook is now more grim since growth in Europe, the United States and China are slowing. This will also slowdown the demand for the country’s exports and slow manufacturing to a 2% growth in the quarter.

The former budget secretary added that other growth drags include slower overseas remittances and the appreciation of the peso, which does not bode well for the purchasing power of Oversease Filipino Worker’s (OFWs) families.

Diokno added that slower public spending will also be a major growth drag in the second quarter as well as the slowdown in agriculture, which posted a growth of only 0.7% in the quarter.

“Public spending hit a rough patch in June, which is perhaps the reason why the Department of Budget and Management has kept mum on the fiscal numbers for the first half of the year and decided to talk about the first seven months of the year instead,” Diokno added.

Growth drivers

However, Terosa said he considered remittances to still be a big boost to domestic consumption in the quarter.

It can be noted that the Bangko Sentral ng Pilipinas (BSP) said remittances posted a growth of 5.2% in the first 6 months of the year at US$11.272 billion.

“(The) growth drivers would include investments particularly capital formation due to infrastructure spending, and domestic consumption due to remittance surge,” Terosa said.

The government will release the official GDP data for the second quarter and the first half of the year on August 30. – Rappler.com