Philippines: Exports drag down economic growth in third quarter
November 28, 2011
In the third quarter, GDP expanded 3.2% over the same period the year before. The reading came in slightly above the 3.1% increase observed in the second quarter (previously reported: +3.4% year-on-year) but well below market expectations of 4.1% expansion. Economic growth was mostly affected by falling exports, as a result of weakening external demand from advanced economies, which are struggling to revive their domestic consumption. That said, domestic demand improved. Private consumption accelerated from 5.4% in the second quarter to 7.1% in the third, boosted by the sustained flow of remittances. Government consumption added 9.4% in the third quarter (Q2: +4.5% yoy), while fixed investment rebounded from an 8.4% contraction in the second quarter to a 3.4% increase in the third. In addition, the third quarter also saw a substantial increase in inventories. Exports of goods and services contracted 13.1%, contrasting the 1.4% increase in the second quarter. Simultaneously, imports grew at a steady pace and added 0.5% in the third quarter (Q2: +0.4% yoy). As a result, the external sector's net contribution to overall economic growth fell from plus 0.6 percentage points in the second quarter to minus 8.2 percentage points in the third. At the sector level, the quarterly reading was almost entirely driven by growth in services, which added 5.3% (Q2: +5.4% yoy). The agriculture sector growth slowed from 8.2% in the second quarter to 1.8% in the third, while the industrial sector contracted 0.2% in the third quarter (Q2: -2.3% yoy). The government expects growth of between 4.5% and 5.5% in 2011.