GDP growth slides anew

PHILIPPINES - In Brief 08 Nov 2018 by Romeo Bernardo

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After the disappointment in the previous quarter, today’s news that 3Q18 GDP slowed to 6.1%, a shade below the median analysts’ forecast, was less of a surprise. The pattern of growth was similar to the earlier quarters, i.e., robust domestic demand that was offset by higher net imports. However, while government continued to spend aggressively and investments, including public construction, continued to grow at double digits, consumer spending continued to weaken, an upshot of higher inflation. Quarter-on-quarter, household consumption, which makes up close to 70% of GDP, grew only 0.6% in 3Q18 vs. 1.6% in 2Q18 (deseasonalized series). Meanwhile, supply side data show strong services growth accompanied by slowing industrial (including manufacturing sector) growth, with growth slightly offset by losses in agricultural output. (See Table)The economy’s performance to date, with GDP averaging 6.3%, means that it would be quite a challenge to attain government’s revised lower growth target of 6.5 to 6.9% for 2018. We are keeping our 6.3% forecast for the year for now and will be releasing our quarterly forecast report in a couple of weeks.As to how today’s GDP figures would affect monetary policy decision, we think that authorities would weigh the headline number less and the underlying robust domestic demand growth more, meaning that today’s data support our view of another rate hike before the year ends.