Philippines: Growth strengthens marginally on strong private and government consumption
August 18, 2017
The Philippine economy recorded another period of robust growth in the second quarter of 2017, supported by strong private and government consumption and benefiting from strengthening external demand. GDP growth accelerated from 6.4% in the first quarter to 6.5% in Q2, almost matching FocusEconomics panelists’ forecast of a 6.3% expansion. In quarter-on-quarter seasonally-adjusted terms, the economy grew 1.7% in Q2, coming in well above the prior quarter’s 1.3% expansion.
Growth in the Philippines continues to benefit from robust household consumption, and was further boosted in Q2 by the ramping-up of government spending. Sky-high optimism among consumers, sustained credit expansion, favorable labor market conditions and robust flows of overseas remittances once more translated into solid household spending growth, with private consumption expanding a robust 5.9% in Q2 following Q1’s 5.8% growth. In particular, Filipinos opted for spending primarily on purchasing food and utilities, as well as transportation. Additionally, growth in government consumption jumped—which partly reflects a reversal of unfavorable base effects in Q1 due to last year’s elections—as public spending rose a strong 7.1%, significantly above the previous quarter’s 0.1% increase. Fixed investment growth was less rosy but nonetheless robust at 9.4%, softening compared to Q1’s 14.7% rise as a result of unfavorable base effects. Lastly, destocking subtracted some percentage points from growth, as businesses strived to keep pace with growing orders.
Meanwhile, the external sector continued to strengthen, as exports of goods and services jumped 19.7% in Q2, not far off from the 20.3% rise recorded in Q1, aided by a weaker peso and mainly reflecting growing external demand from China, the United States and Singapore, which highlights the competitiveness of the country’s business process outsourcing industry. Imports also grew robustly at 18.7% in the second quarter, which was virtually unchanged from the 18.6% increase observed in Q1, a testament to the robustness of domestic demand.
The economy is poised to maintain its growth momentum going forward, supported by buoyant domestic demand, a strengthening external sector, broad macroeconomic stability and growing infrastructure expenditure. A favorable regional environment will continue to support the external sector. Growing remittances and reasonable inflation will stimulate private consumption and buoyant business sentiment, and accelerating growth in public infrastructure spending will lead to expanding fixed investment.