Philippines: Growth remains buoyant in Q4
January 24, 2018
The economy recorded another period of robust, albeit moderating, growth in the last quarter of 2017, supported by strong private and government consumption, as well as strengthening external demand. Annual GDP growth decelerated from 7.0% in Q3 to 6.6% in Q4, matching FocusEconomics panelists’ forecast and bringing growth for 2017 as a whole to 6.7%. In quarter-on-quarter seasonally-adjusted terms, the economy grew 1.5% in Q4, coming in slightly below the prior quarter’s 1.7% expansion.
Robust household consumption continued to underpin annual growth, which was further boosted in Q4 by higher government spending. Upbeat consumer confidence, strong credit expansion and tightening labor market conditions translated into solid consumer spending growth: Private consumption expanded a robust 6.1% in Q4, accelerating from Q3’s 5.3% growth. Public spending rose to a two-year high of 14.3%, significantly above the previous quarter’s 8.3% increase. Fixed investment growth also accelerated, to 9.3% (Q3: +8.0%), as it benefited from the government’s ongoing infrastructure push. On the other hand, inventory destocking brought down GDP growth slightly.
Meanwhile, the external sector’s contribution to growth swung from positive to negative in Q4, as import growth accelerated on the back of stronger domestic demand. Imports grew a robust 17.5% in Q4, up from the 15.8% increase in Q3. Growth in exports of goods and services also accelerated, from Q3’s 17.7% to 18.6% in Q4, benefiting from strong overseas orders of electronic products.
This year should see the economy expanding at a pace broadly similar to 2017. Household spending is expected to expand robustly thanks to growing remittances and the measures contained in the Tax Reform for Acceleration and Inclusion (TRAIN). The TRAIN came into effect at the beginning of 2018 and entails lower personal income tax rates for most of the population. Moreover, the government’s strong investment push should continue to buttress fixed investment and contribute to filling part of the infrastructure gap.
Philippines GDP Forecast
Against this backdrop, FocusEconomics Consensus Forecast panelists expect the economy to expand 6.6% in 2018, which is up 0.1 points from last month’s estimate. For 2019, they expect economic growth of 6.5%.