Philippines: Growth softens marginally on slower government consumption growth
May 18, 2017
The Philippine economy, despite decelerating somewhat, recorded another period of robust growth in the first quarter of 2017, supported by strong external demand and household spending. GDP growth moderated from 6.6% in the fourth quarter of last year to 6.4% in Q1, almost matching FocusEconomics panelists’ forecast of a 6.6% expansion. In quarter-on-quarter seasonally adjusted terms, the economy grew 1.1% in Q1, coming in below the prior quarter’s 1.7% expansion.
Growth in the Philippines continues to be underpinned by robust private consumption. Steadfast consumer optimism, healthy credit expansion, a tight labor market and growing flows of overseas remittances translated into solid, if moderating, consumer spending growth, with private consumption expanding a robust 5.7% in Q1 following Q4’s 6.2% growth. On the downside, growth in government consumption came to a virtual halt, as public spending rose just 0.2%, significantly below the previous quarter’s 4.5% expansion. This was partly due to a high base of comparison, as Q1 2016 saw a double-digit increase in government spending ahead of May’s presidential elections. Fixed investment growth was 11.8%, and despite remaining robust, softened compared to Q4’s 18.5% rise.
Meanwhile, the external sector strengthened considerably, as exports of goods and services jumped from a 13.4% increase in Q4 to a 20.3% rise in Q1, mainly reflecting growing external demand from China—which is shifting to a more consumer-oriented growth model. Imports also accelerated and expanded 17.5% in the first quarter, which was up from the 15.4% increase observed in Q4, a testament to the robustness of domestic demand.
The domestic economy is poised to maintain its growth momentum going forward, underpinned by the recovery of external trade and steady growth in private consumption, while fixed investment will benefit from higher business confidence and government infrastructure spending.