Philippines: GDP accelerates in Q4, beating market expectations
According to a preliminary reading, GDP growth improved to 7.7% year-on-year in the fourth quarter, from 6.9% in the third quarter, yet again beating market expectations in the process.
The reading meant that 2021’s overall growth reached 5.6%, rebounding from the 9.6% contraction recorded in 2020. A pickup in private consumption, which increased 7.5% in the fourth quarter (Q3: +7.1%), was largely behind the stronger print, enabled by looser restrictions and fewer Covid-19 cases. On the flipside, public spending growth waned to 7.4% in Q4 (Q3: +13.8% yoy). Fixed investment growth also moderated to 9.5% in Q4, down from 15.5% in Q3.
On the external front, exports of goods and services growth fell to 8.3% in Q4, marking the worst reading since Q1 2021 (Q3: +9.1% yoy). Conversely, imports of goods and services growth picked up to 13.7% in Q4 (Q3: +13.0% yoy).
On a seasonally-adjusted quarter-on-quarter basis, economic growth was steady at 3.1% in the fourth quarter, following the previous period’s 3.1% increase. Q4’s reading marked the best result since Q3 2020.
Commenting on the outlook, Nomura’s economists Euben Paracuelles and Rangga Cipta remain skeptical that such momentum can be maintained:
“We expected slowing momentum from Q3 2021, as Q3 was partly boosted by pent-up consumer demand for durables after the lockdowns that we thought was not sustainable. […] Private consumption growth picked up [in annual terms despite] growth on a sequential basis falling substantially […]. This partly reflects slowing growth of spending on durables, such as cars and furniture, consistent with our view that pent-up demand in these items will fade. However, growth of spending on food rose while that of recreation and culture jumped materially, suggesting limited mobility restrictions helped boost spending on some discretionary items, especially during the holiday season.”
Meanwhile, Chua Han Teng, economist at DBS, highlights the risk that the Omicron variant poses to momentum going forward:
“The Philippines’ economic recovery, which is highly dependent on domestic demand, notably private consumption (accounting for over 70% of GDP: the highest in the region), remains beholden to the ebb and flow of healthcare responses. More localized and calibrated virus restrictions are still having a negative impact on retail and recreation mobility, as seen from the sharp dive seen during the Omicron wave in January.”