Q2 GDP to be in line with govt expectation — economists

Strong domestic demand and improving industrial production, boosted by election activities in May, support a strong second quarter output in line with government expectation, economists polled by GMA News Online said.

A poll of nine private sector economists yielded a median forecast of 7.3 percent second quarter gross domestic product (GDP) growth, over the government’s 6 to 7 percent target this year.

The consensus is higher than the second quarter of 2012's actual 5.9 percent and lower than first quarter 2013's 7.8 percent growth.

Without giving a ballpark figure, Socioeconomic Planning Secretary Arsenio Balisacan earlier said the Philippines sees a "fairly strong" second quarter GDP, which will be released next Thursday, August 29.

Domestic demand

Most analysts said domestic demand in the second quarter continued to be strong.

Standard Chartered economist in Singapore Jeff Ng said GDP growth is expected to remain robust from April to June on domestic economic activities anchored on higher investments and household consumption supported by slightly better remittance growth.

"Private consumption likely rose in the second quarter thanks to slightly better remittances and accommodative monetary policy thanks to slowing inflation," said HSBC economist in Hong Kong Trinh Nguyen.

She noted that net exports, however, dragged total demand down, as global conditions were weak, causing export of goods to contract in the second quarter while import of goods likely rose.

Meanwhile, Jackson Ubias, Research Director of Institute for Development and Econometric Analysis (IDEA), said domestic demand has "greatly benefited from stable consumer prices, sufficient amount of liquidity that continue to support low interest rates, and robust remittance inflow."

Several indicators—low rates, low inflation environment, improving consumer expectations—"all suggest that Philippine economic growth is likely to outperform again even though external demand has been lackluster," said Eugene Leow, economist at DBS Bank.

Industrial and services sector

Euben Paracuelles, economist at Nomura, noted that larger sectors are powering ahead, particularly the industrial and services sectors.

"Industrial production rose sharply by 13.5 percent year-on-year in the second quarter from 5 percent in the first quarter," he said. "The services sector also likely remained strong, considering not only the impact of the midterm elections in May, but also buoyant sentiment.”

Vic Abola, economist at University of Asia and Pacific, noted that there was a shift in manufacturing, which gave the sector a better output for the period.

"Earlier it was on food but now it's turning to metals and chemicals," he said.

Full year GDP

GMA News Online’s poll shows a median forecast of 7 percent full-year 2013 growth, higher than last year’s 6.6 percent.

"We think that export growth will experience a modest recovery as the year progresses, while the domestic economy remains resilient to any external challenges," Standard Chatered's Ng said.

Ubias of IDEA gave a full-year baseline forecast of 6.6 percent and a high of 7.7 percent "should we see significant improvements in the global economy, which should boost exports and remittances."

HSBC's Nguyen said while fiscal spending and a gradual rise of investment will step in to help, the economy is expected to slow sequentially, although still growing more than 6 percent over the year.

Metropolitan Bank & Trust Co. research head Ildemarc Bautista projected a 7 percent full year GDP, while giving 7.5 percent on second quarter growth on "base effects," as the Philippines had high GDP numbers at the end of 2012.

"Still, we think it's consumer, government and investment spending driving the growth for the full year," he added. — KBK, GMA News