Philippines: Most economists forecast slower GDP growth in Q3

MANILA, Philippines — The economy likely grew at a slower pace in the third quarter as high inflation affected consumption, economists polled by The STAR said.

Most, or six out of the seven, economists asked on their gross domestic product (GDP) growth forecast for the third quarter said the Philippine economy likely grew by a slower pace than the 7.4 percent clip in the second quarter, and the 6.9 percent growth in the third quarter last year.

The government is set to report the country’s economic performance for the third quarter on Nov. 10.

Miguel Chanco, chief economist for emerging Asia at Pantheon Macroeconomics, said the economy likely slowed to 4.6 percent in the third quarter, citing weak household spending.

“Essentially, the report will more accurately portray the weakness in household spending, following the substantial quarter on quarter contraction in consumption in the previous quarter, well before the acute phase of the inflationary spike,” he said.

Latest available data from the Philippine Statistics Authority showed inflation accelerated to 7.7 percent in October, the highest in nearly 14 years, from 6.9 percent in September.

Oxford Economics assistant economist Makoto Tsuchiya said the economy likely expanded by 5.8 percent in the third quarter as high inflation and monetary policy tightening likely weighed on domestic demand.

“While we expect sequential rebound in household spending after a contraction in the second quarter, high commodity prices, supply chain stress, and weaker peso contributed to keeping imports’ prices elevated, which reduced consumers’ real purchasing power,” he said.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said the economy likely grew by just over six percent in the third quarter, with higher inflation being one of the risk factors.

“Higher interest rates or financing costs or borrowing costs largely brought about by more aggressive Fed rate hikes and other central bank rate hikes or monetary tightening in an effort to bring down elevated inflation would also be a drag to further economic growth for the third quarter and fourth quarter, in terms of curbing demand for new loans or credit that spur more investments, which, in turn, generate more employment and other business or economic opportunities,” he said.

For De La Salle University School of Economics associate dean Mitzie Irene Conchada, economic growth in the third quarter could have slowed down to 6.2 percent due to inflation woes, weaker exports performance, and the depreciation of the peso.

Asian Institute of Management economist John Paolo Rivera said he expects the economy to have posted a 6.5-percent growth in the third quarter due to inflationary pressures, supply constraints and currency depreciation.

For his part, Jonathan Ravelas, managing director at eManagement for Business and Marketing Services, said GDP growth likely cooled to seven percent in the third quarter, citing the impact of inflation on household consumption, which already slowed down in the second quarter this year compared to the first quarter.

He also said the country’s merchandise exports fell from July to August, amid slowing external demand.

Meanwhile, Ateneo Center for Economic Research and Development director Ser Percival Peña-Reyes expects the economy to have posted a 7.7-percent growth in the third quarter with accommodation and food service activities, transport and storage, and construction as main drivers.

“On the demand side, both consumption and investment (specifically construction) are expected to accelerate,” he said.

He said inflation, however, remains a risk not just in the country but in other parts of the world as well.

The government is targeting a 6.5 to 7.5-percent growth for this year.

As of the first semester, the economy grew by 7.8 percent.

Earlier, Socioeconomic Planning Secretary Arsenio Balisacan said the government would just need to grow 5.3 percent in the second half of the year to achieve the lower end of the growth target of 6.5 percent.

Source: https://www.philstar.com/business/2022/11/07/2221941/most-economists-forecast-slower-gdp-growth-q3