Philippines: GDP drops at softer rate in Q1 but fails to meet market expectations
GDP dropped at a more moderate, albeit still-pronounced, rate of 4.2% year-on-year in the first quarter, following the 8.3% decline logged in the fourth quarter of last year. However, the result undershot market analysts’ expectations of a 3.0% contraction.
The softer downturn reflected a broad-based improvement. Household spending contracted at a slower pace of 4.8% year-on-year in the first quarter, which marked the best reading since Q1 2020 (Q4 2020: -7.3% yoy). Similarly, fixed investment slid at a milder rate of 20.2% in Q1 compared to the 30.0% decrease tallied in the prior quarter, although this still marked the fifth consecutive quarter of tumbling capital spending. Meanwhile, government spending growth accelerated to 16.1% in Q1 (Q4 2020: +5.1% yoy).
On the external front, the decline in exports of goods and services moderated to 9.0% year-on-year in the first quarter from 10.2% in Q4 2020. In addition, imports of goods and services fell at a slower pace of 8.3% in Q1 (Q4 2020: -20.2% yoy).
On a seasonally-adjusted quarter-on-quarter basis, economic growth slowed markedly to 0.3% in Q1 from 3.8% in the previous period. Q1’s reading marked the worst since Q2 2020.
Commenting on the first quarter’s result and the growth outlook, Julia Goh and Loke Siew Ting, economists at UOB, said:
“The continuation of government policy support, recovery in manufacturing production, accelerating digitalisation, and increased demand for healthcare services during the pandemic were the main factors aiding the overall economic recovery last quarter. Taking into consideration the bigger-than-expected GDP decline in 1Q21 and re-imposition of stringent containment measures between late March and May this year, we slash our 2021 GDP growth forecast to 5.5% (from 7.0% previously). A wider, more effective vaccination rollout and expedition in government spending will be key impetus to sustain solid growth revival in 2H21 amid year-ago low base effects and improving external demand.”