GDP at 6%

PHILIPPINES - In Brief 26 Nov 2015 by Romeo Bernardo

---

The economy’s 3Q15 performance, with growth accelerating to 6% on strong domestic demand, was generally in line with what we expected. The main source of higher growth last quarter was government spending. Public consumption rose 17% and public construction jumped 41%. Improved government expenditures made up for weaker private investments, particularly construction; household consumption remained robust (+6.3%), supported by continuing low inflation. Notwithstanding double-digit growth in services exports, increased importation to meet domestic demand led to a wide trade deficit, dragging overall growth. Looking at the supply side, the higher 3Q15 GDP was due largely to services, which grew 7.3%, its highest since late 2013. The main service subsectors contributing to the impressive growth were trade, communication and real estate, renting and other business activities. Manufacturing growth quickened but at 5.6%, was below levels reached in past years. Agriculture managed a 0.4%, with gains in fishing hiding a double-digit drop in palay output. 3Q15 performance, along with an upwardly revised 2Q15 growth (from 5.6% to 5.8%), brought year-to-date GDP growth to 5.6%. This is just shade below our 5.7% full year forecast. If government is able to maintain its spending momentum, there is a good chance that the final 2015 growth rate will exceed our expectation.