Poll: Q2 PH growth likely slowed to 2.7%

MANILA, Philippines — Economic growth in the Philippines likely slowed to its weakest quarterly pace in nearly two decades outside the pandemic, as war-driven inflation squeezed consumers and businesses while government spending remained hobbled by a recent corruption crackdown.

Gross domestic product (GDP), the value of all goods and services produced in the country, likely expanded by just 2.7 percent from a year earlier in the second quarter, according to the median estimate of 14 economists surveyed by the Inquirer last week.

READ: BSP sees inflation holding above target in July

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If the forecast proves accurate, the data due on Aug. 7 would show growth slowing further from 2.8 percent in the first quarter.

Excluding the sharp contractions during the COVID-19 pandemic, it would also mark the weakest quarterly expansion since the final three months of 2009, when the economy grew 1.8 percent.

The consensus estimate also falls well below the Marcos administration’s downgraded full-year growth target of 3.5 percent to 4.5 percent, underscoring the economy’s struggle to regain momentum.

Weak gov’t spending

Emilio Neri Jr., lead economist at Bank of the Philippine Islands, pointed to three major drags on growth: a steep contraction in public infrastructure spending, softer private investment and slower household consumption as elevated inflation—particularly higher transport and electricity costs—eroded purchasing power.

“The quarter also marked the full transmission of the US-Iran conflict to the domestic economy, with elevated oil prices and heightened geopolitical uncertainty further dampening business confidence and overall economic activity,” Neri said, estimating second-quarter growth at 1.9 percent.

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READ: Inflation eases to 6.4% in June

Those headwinds were likely partly offset by resilient exports, particularly artificial intelligence-related electronics, as well as sustained demand tied to electric vehicles and solar energy, which continued to support manufacturing activity, he added.

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Aris Dacanay, Asean economist at HSBC Global Investment Research, also expects the economy to have grown 2.7 percent, saying the country’s traditional growth drivers struggled to regain momentum.

“Public infrastructure disbursements have not picked up since the government undertook an expansive corruption investigation last year, likely cutting growth in the Philippines to about half of its potential,” Dacanay said.

“Furthermore, private demand was likely tepid. Apart from a wobbly labor market, the spike in inflation—brought about by the turmoil in the Middle East—likely tightened, if not shrank, households’ purchasing power and firms’ margins,” he added.

Analysts said in a separate Inquirer poll that inflation likely remained elevated in July, rising by 6.4 percent from a year earlier.

If the forecast proves accurate, inflation would match June’s pace and fall within the Bangko Sentral ng Pilipinas’ projected range of 5.6 percent to 6.6 percent.

Domini Velasquez, chief economist at China Banking Corp., meanwhile, also projected a 2.7-percent growth, adding a warning that extreme weather conditions could also weigh on GDP growth in the coming months.

“Looking ahead, GDP growth could gain some momentum in the second half of the year as government agencies address infrastructure spending backlogs,” Velasquez said. “However, a prolonged El Niño remains a downside risk to agricultural production.” INQ