GDP growth climbs to 6.4% in 4Q19

PHILIPPINES - In Brief 23 Jan 2020 by Romeo Bernardo

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As expected, stronger public spending pushed GDP growth to 6.4% in 4Q19, up from a low of 5.5% in 2Q19 and a downwardly revised 6% growth rate in 3Q19. Both government consumption and public construction grew at double-digit rates, reflecting fierce efforts to catch up on spending held up in 1H19 by delayed budget approval. In comparison, despite lower inflation and interest rates, growth in private consumption slackened to 5.6% in 4Q19 from 5.9% in 3Q19, due likely to the impact of the peso’s appreciation on dollar remittances. Data available for 4Q19 (October and November) show that the robust 5% growth in dollar remittances translated into only 0.5% in peso terms. Meanwhile for the third straight quarter, investments in durable equipment declined and inventories were drawn down.Overall, domestic demand (C+I+G) grew 5.3% in 4Q19, up from 1.9% in 2Q19 and 3.8% in 3Q19. Propping up GDP growth also was net exports (X-M), a shrinking negative number which contributed positively to growth. Production side data show that that the 4Q19 uptrend in GDP growth was driven primarily by the services sector as growth in the industry and agriculture sectors slowed from their 3Q19 growth clip.The economy’s 4Q19 performance brings the full-year 2019 GDP growth to 5.9%, our contrarian forecast at the start of last year. Full year growth is below the low-end of government’s downwardly revised 6-6.5% growth target. Notwithstanding increasing downside risks especially on the domestic investment climate, we still think the chances of 2020 growth rising back above 6% better than even, mainly on the back of stronger public spending. We are firming up our set of forecasts for our outlook rep...