Think thank sees slower 2018 growth as PHL’s Q3 GDP slips

London-based think tank Capital Economics has lowered its growth outlook for the Philippines for 2018 on the back of slower gross domestic product (GDP) print in the third quarter.

“Given Q3’s weak outturn we have revised down our forecast for 2018 as a whole, from 6.5 percent to 6.2 percent,” Capital Economics said in a statement.

“Our forecast for growth of 6.2 percent this year, and 6.0 percent next, falls short of the government’s pared-back target of 6.5-6.9 percent for 2018 and well short of its very optimistic target of 7-8 percent for 2019,” it said.

The Philippine Statistics Authority reported that the Philippine economy grew at a slower pace of 6.1 percent in July to September. 

The third quarter GDP compares with the revised 6.2 percent in the second quarter of the year and the revised 7.0 percent in the same period last year.

“Today’s outturn was roughly in line with what was expected,” according to Capital Economics, citing Bloomberg’s median estimate of 6.2 percent and its own forecast of 5.8 percent.

“Looking ahead, with the economy facing numerous headwinds, the chances of sustained rebound in growth are slim,” the think tank said.

Local economists, however, have a different outlook on the country’s full-year growth.

“It might be the case that growth brought about by government spending on ‘Build, Build, Build’ might have been crowded out by lower private consumption due to higher inflation,” independent economic consultant John Paolo Rivera said.

“Growth can be a little bit higher depending on the power of private consumption this Christmas season, accompanied by inflow of OFW remittances,” Rivera added.

Capital Economics emphasized that the inflation rate is set to remain elevated, and continue to put pressure on household spending.

“Tighter monetary policy is also set to drag on growth, with the central bank likely to hike rates further this year and the effects of previous rate hikes yet to fully feed through,” its said.

“What’s more, the external environment is set to deteriorate.”

Its global growth forecasts imply weaker external demand, which is likely to be made worse by the spillover from trade tensions between the US and China.

“Finally, we suspect private investment will remain weak as President Duterte’s erratic leadership continues to weigh on investor sentiment,” it said.

With the 6.1 percent in the third quarter, the 2018 GDP will settle at 6.4 percent, Union Bank chief economist Ruben Carlo Asuncion said.

“I’m anticipating Q4 GDP 2018 at 6.5 percent due to seasonal uptrend of consumption,” Asuncion said. —Ted Cordero/VDS, GMA News