Economy weakens; Q1 GDP slows to 6.4%

Philippines first-quarter GDP grows 6.4 percent year-on-year, slowest in one-and-half years

The Philippine economy expanded 6.4 per cent in the first quarter from a year ago, the slowest pace in 1-1/2 years and below market expectations, data from the statistics agency's website showed as of 0131 GMT. Overall, domestic demand added 6.6 percentage points to the overall economic growth.

Preliminary data from the Philippine Statistics Authority (PSA) showed that growth in economic output - as measured by gross domestic product (GDP) - slowed from the 6.6% posted in the preceding quarter and from 6.9% logged during the same period past year.

"It is lower than expected, and for this we were somewhat downcast because we were expecting something like around the midpoint of the 6.5-7.5 percent growth range".

"It turned out that base effects were more of a factor with the dissipation of the election spending impact including lesser government expenditures for the first quarter", said Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines (UnionBank). Industry growth decelerated to 6.1 percent from 9.3 percent in the first quarter of 2016.

"Our first-quarter performance bodes well for the economy, as it is broadly in line with our 6.5-percent to 7.5-percent growth target for the year", National Economic and Development Authority (Neda) Secretary Ernesto M. Pernia told reporters in a news briefing on Thursday.

The agriculture sector, meanwhile, outperformed as it grew 4.9 percent, reversing several quarters of contraction.

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"For the first quarter, we overtook Vietnam and Indonesia which grew by only 5.1%, and Thailand by only 3.3%".

"Exports of goods grew by 22.3 percent, the fastest since the third quarter of 2010, and exports of services grew steadily by 14.3 percent in the first quarter of the year", he said. Cuyegkeng predicted that government spending would recover in the second half.

Pernia said to sustain the growth momentum of exports, it is important to ease government regulation, strengthen market intelligence gathering with the help of the private sector, and maximize trade agreements and economic groupings, especially with our Asean neighbors.

"Given the government's aggressive fiscal plan this year, it remains to be seen if spending may accelerate going forward, which will definitely be a big boost to GDP growth momentum", said Gundy Cahyadi, economist at DBS Bank.

On the external front, the domestic economy faces risks arising from geopolitical tensions in various regions, market volatility from rising interest rates in the United States, and intensifying protectionist sentiments in the West.

"We also need to ensure that inflation will remain modest for the next three quarters to keep demand strong".

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