Q2 GDP cratered to 4.3% y/y (-0.9% q/q)

The Philippine Statistics Authority (PSA) [link] released its Q2 gross domestic product (GDP) data, and showed that the Philippine economy expanded by only 4.3% in Q2/23 relative to its size in Q2/22, and that the economy actually contracted by 0.9% relative to the previous quarter. GDP is a macroeconomic metric that looks to measure the amount of spending in the economy over a certain period, and it considers everything from household consumption, to capex spent by companies, to the money spent by the government on various programs like infrastructure. While the 4.3% GDP figure represents growth, the actual size of that growth was well-below what analysts had expected, which ranged between 5.5% and 7.5%, with 6.0% growth as the median estimate. The government’s target is to have growth remain within the 6.0 to 7.0% range. One of the major factors noted by the PSA and by other analysts was the contraction in government spending. The government was simply not spending enough money to juice its own growth metrics. Analysts also noted a weakness in consumer demand that was blamed on inflation, particularly in the amount spent on clothing and footwear.

 

MB bottom-line: This is a massive “miss” to have actual growth be around 20% lower than the lowest estimate on the board. A number starting with 4 wasn’t even in the imaginations of the economists making these estimates. Going through all of the commentary this morning, it’s clear that people have already turned their minds to how the BSP should now act (or not act) to prevent further slowdown and give our economic managers a shot at achieving the government’s target range for FY23. Despite the US Federal Reserve’s recent 25 basis point increase, most are now calling on the BSP to “pause” rate increases at its meeting next week. Already the peso’s value has fallen relative to the dollar as a result of this news, and that could get worse if a BSP pause locks in the temporary differential that was created by the Fed’s earlier raise. There’s a lot going on here!

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