Q3 GDP growth lowered to 6.0%

Credit to Author: The Manila Times| Date: Wed, 23 Jan 2019 16:23:34 +0000

State statisticians on Wednesday lowered the official third quarter growth figure ahead of the release of October-December and full-year results for 2018.

Year-to-date gross domestic product (GDP) growth remained at 6.3 percent despite the revised July-September number of 6.0 percent — down from 6.1 percent previously, data from the Philippine Statistics Authority (PSA) showed.

“This was due to the downward revisions in manufacturing; trade and repair of motor vehicles, motorcycles, personal and household goods; and financial intermediation,” the PSA said in a statement.

Net primary income from the rest of the world was also cut to 4.8 percent from 5.6 percent, resulting in lower gross national income growth of 5.8 percent from 6.0 percent.

Revisions to GDP figures, the PSA said, follow approved policy that is consistent with international standard practices.

Third quarter growth slowed from 6.2 percent in April-June and 6.6 percent during the first three months of the year as inflation accelerated and the peso weakened.

The government, which has a downwardly-revised GDP growth goal of 6.5-6.9 percent — from 7.0-8.0 percent previously, expects to hit the lower end of the range.

HSBC outlook

In a related development, financial services firm UBS on Wednesday said it expected Philippine economic growth to slow this year and the next from an estimated 2018 result of 6.4 percent — also a deceleration from the previous year’s 6.7 percent.

“[The] Philippines’ real GDP momentum should slow in 2019 after a recovery from policy-induced weakness in the first half of 2018. We project 6.1 percent real GDP growth in 2019 and 2020 after 6.4 percent [estimate] in 2018,” UBS said in a report.

UBS’ 2019 and 2020 forecasts fall below the government’s 7.0 to 8.0 percent target for years.

“Monetary conditions have tightened as a result of the 2018 rise in market and policy rates. The escalating trade war should have an impact, albeit modestly due to the low weight of goods exports in the economy. A slight trade impact could allow consumption growth to recover on lower inflation,” it added.

The Bangko Sentral ng Pilipinas (BSP) raised policy rates by 175 basis points last year due to the rising inflation. UBS said lower inflation expectations would allow the BSP to keep policy rates on hold until next year.

“Although real GDP growth is projected to remain above 6 percent and credit growth is likely to stay in double digits, inflation can fall because the vast majority of the acceleration in inflation in 2018 was driven by food prices,” it noted.

Inflation is expected to hit 2.9 percent this year and 3.7 percent in 2020.

Instead of hiking policy rates, the BSP is expected to resume cuts to bank reserve requirements.

Meanwhile, while the high inflation “reduced” President Rodrigo Duterte’s popularity, a strong showing by the president’s supporters in the 2019 mid-term elections is expected to bolster policy continuity,

“Post-election, there will be a window of 18 months for new policy initiatives before attention switched to the 2022 Presidential elections,” HSBC noted.


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