Weak exports tame Q2 GDP growth – analysts

MANILA, Philippines - Analysts expect weak exports to have tamed a still fast economic growth in the second quarter.

In separate research notes, Moody’s Analytics and Singapore-based DBS Ltd. said growth, as measured by gross domestic product (GDP), could fall below the 6.9 percent recorded in the first three months of the year.

Moody’s expect the Philippine economy to have grown 6.8 percent year on year while DBS sees Philippine GDP expanding by 6.1 percent for April to June this year.

 Both Moody’s and DBS said the government remains on track to meet its six- to seven-percent target for the year, which was downscaled from the original projection after the Duterte administration took over.

While still a “slight” slowdown, the unit of debt rater Moody’s Investors Service said the local economy effectively “shook off” global uncertainties as well as that brought about by the change in government last May.

Private consumption and investment remained economic growth drivers during the period, Moody’s said.

On the external front, Moody’s said the picture is likely to be “mixed” with exports continuing its contracting trend overall due to weak demand, despite better numbers on service outbound shipments.

According to the Philippine Statistics Authority, the value of merchandise exports dropped 7.5 percent to $26.83 billion in the first semester.

“Service exports have been increasing well as a result of foreign firms outsourcing business services to the Philippines,” Moody’s said.

DBS agreed on exports’ “poor” performance, but said investment growth has been healthy so far as the previous administration tried to finish off projects before the polls.

Gundy Cahyadi, an economist at DBS, said frontloading of spending could have supported economic growth as suggested by higher capital imports in May.

In contrast to exports, imports rose 18.2 percent to $31.893 billion for the first five months, with capital shipments doubling in May alone, PSA data showed.

There could be some correction going forward, Cahyadi said, but given the Duterte government’s planned higher spending, this could not entirely affect overall economic performance.

For the whole of 2016, DBS forecasts Philippine GDP growing by an average 6.3 percent.

“What is interesting is to monitor private sector sentiment under the new government,” Cahyadi said.

“At this juncture, we see some upside risks to our full-year GDP growth (outlook) in 2016,” he added.