Philippines: Growth in the Philippines remains buoyant in Q4
January 30, 2017
The Philippine economy, despite decelerating somewhat, recorded another period of robust growth in the final quarter of 2016, supported by strong fixed investment and particularly by a surge in public construction activity. GDP growth moderated from a revised 7.0% in the third quarter (previously reported: +7.1% year-on-year) to 6.6% in Q4, which matched FocusEconomics panelists’ forecasts. The final quarter’s still healthy result brought full-year 2016 GDP growth to 6.8%, up from 5.9% in 2015 and the highest reading since 2013.
Growth in the Philippines continues to be underpinned by robust domestic demand, which is largely offsetting the external sector’s negative contribution to growth. The ongoing expansion in public spending has been reflected in both an acceleration in public construction activity—which grew 23.0% in Q4, up from Q3’s 20.1%—and a pick-up in government consumption. Strong public investment led fixed investment to grow 18.7%, which was nevertheless a softer expansion than Q3’s 23.8%. Rising consumer confidence, falling unemployment and growing overseas remittances translated into solid, if moderating, consumer spending: private consumption expanded a robust 6.3% in Q4 following Q3’s 7.1% growth.
Meanwhile, the external sector continued to contribute negatively to growth, as imports of goods and services accelerated from a 13.6% increase in Q3 to a 15.0% rise in Q4, reflecting the strong domestic economy. Exports expanded 10.4% in the fourth quarter, which was up from the 8.8% increase observed in Q3.
The robust growth in the final quarter reflects the strong fundamentals that underpin the current growth phase and bodes well for the Philippines’ outlook. In this respect, Euben Paracuelles and Lavanya Venkateswaran, economists at Nomura, state that:
“The Q4 data point to some upside risks to our 2017 GDP growth forecast of 6.3% […]. Growth in the overall construction sector remained robust throughout the course of the year despite the government transition, which suggests infrastructure projects have been resolutely implemented since the Duterte administration took over in mid-2016. This suggests the government could make more progress than we initially pencilled into our forecast.”