By Derco M. Rosal
Think tank Pantheon Macroeconomics expects the Philippines’ gross domestic product (GDP) growth to have slowed below five percent in the third quarter of 2024, way below the consensus expectations, and at a level that is a 14-year low.
Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, anticipates the country’s economic growth to decline significantly to 4.6 percent from 6.3 percent posted in the second quarter.
Majority of the economists polled by Manila Bulletin placed their expectations within five to 6.3 percent, largely due to weakening domestic demand and global economic conditions.
Chanco’s forecast is even lower than Germany-based Deutsche Bank’s 5.4-percent forecast.
“The consensus is probably underestimating both the severity of the inevitable base-effect hit to government spending growth and the lingering sluggishness in private consumption this technicality will painfully re-expose,” Chanco said.
“Philippine GDP growth likely relapsed to [4.6 percent in the third quarter], in line with the sluggishness in consumption,” he said in a report.
The Philippine Statistics Authority (PSA) will release the third quarter GDP report on Thursday, Nov. 7.
Chanco’s growth forecast marks a significant setback after a steady recovery in the first half of the year, which saw growth peak in the second quarter.
The economist noted that government spending rebounded sharply with an 8.2 percent increase in the third quarter of 2023 after a 5.8 percent drop in quarter two.
Thus, he expects the “high bar set by this wild swing” to lower the annual growth rate significantly, dropping it to about 4.5 percent from nearly 11 percent in the last report.
For the third quarter of 2024, Pantheon Macroeconomics expects private consumption to recover with a 1.8 percent increase after a slight decline in the first half of the year.
However, this “punchy” gain is “unlikely to prevent the yearly rate from inching down to a 14-year low” of 4.6 percent, excluding the pandemic period, Chanco asserted.
“Government spending and investment should offer some cushion, partly with help from base effects,” Chanco further said.
Asked whether the recent inflation slowdown and the Bangko Sentral ng Pilipinas' (BSP) rate cuts boosted the third-quarter economic performance, Chanco said “it’s far too soon to say that [easing] inflation and falling interest rates are now supporting growth.”
According to Chanco, monetary policy changes take time to impact the real economy, and despite recent rate cuts, policy in the country remains tight as the inflation-adjusted target rate is still historically high.
He said the quarter-four growth will largely depend on whether the slight increase in private consumption momentum from quarter three can continue.
However, Chanco said, risks lean to the downside, as the quarter-three boost in household spending seems driven mainly by drawing on limited savings.
Looking ahead, the economist forecasts the local economy to pick up in the last quarter at 5.6 percent, but it remains below the government’s target.
Meanwhile, the PSA has revised the Philippines’ quarter-two GDP growth rate upward to 6.4 percent from the initial 6.3 percent estimate.
The growth in the previous quarter was due to strong consumer spending and increased government infrastructure investments, which boosted economic activity despite global headwinds.