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Q3 GDP Growth Likely Slowed — Poll

Q3 GDP growth likely slowed — poll

The Philippine economy may grow more slowly in the third quarter as higher inflation, tighter monetary policy and a weaker peso dampen consumer spending.

Gross domestic product (GDP) rose 6.1 percent year-on-year from July to September, according to the average forecast of 16 analysts surveyed by Business World last week.

If realized, it would be slower than the 7.4 percent GDP growth recorded in the second quarter and the 7 percent growth recorded in the same quarter of 2021.

Analyst's forecast of GDP for the third quarter of 2022

This would raise the nine-month average GDP growth to 7.2%, which is still within the DBCC's annual target of 6.5-7.5%.

The Philippine Statistics Authority (PSA) plans to release third quarter GDP data on November 10.   

Analysts said economic growth could be hampered by accelerating inflation, devaluing the peso against the US dollar and raising interest rates.

Security Bank Chief Economist Robert Dan J. Ross , who estimated third-quarter GDP growth at 5.2 percent, said the slower growth was "mainly due to inflation and a weaker peso."

"They have reduced the capacity to grow private consumption, which is about 72% of the GDP. However, the government has not made new restrictions to allow economic activity to continue.

Inflation rose to 6.9% in September, bringing the third-quarter average to 6.5%, above the Bangko Sentral ng Pilipinas (BSP) target of 2-4 percent.

January-September inflation was 5.1%, below the BSP's forecast of 5.6% for the full year.

Compared to the previous quarter, the peso depreciated by 6.64 percent, or 3.65 pesos, from 54.98 pesos to 58.62 pesos at the end of June 30.

Chief Economist of China Banking Corporation. Dominique S. Velasquez expects third quarter GDP to be 6.2%, driven by the external outlook and higher prices and interest rates.

At its September meeting, the BSP raised its overnight lending rate by 50 basis points (bps). Since May, the central bank has raised key interest rates by 225 basis points to curb inflation.

"Positively, the number of tourists increased in the third quarter, which contributed to the consumption of services such as air travel, accommodation, etc. We will see how high-value goods such as car sales will continue to challenge the environment of high interest rates," Velasquez said in an email to the property. He said no "proof of impact".

He added that price increases could encourage consumers to forgo unnecessary goods and services.

Bank of the Philippines Chief Economist Emilio S. Neri Jr. said despite the continuation of face-to-face meeting activities, higher inflation may contribute to a "significant slowdown" in household consumption. He also pointed out that the slowdown of the money transfer could lower the overall consumption expenditure.

On the other hand, Mr. Neri said the main risks to his outlook include the global manufacturing managers PMI (PMI), strong car sales, low unemployment and improved bank lending.

However, Pantone's chief development economist for Asia, Miguel Chanca, who forecasts GDP growth of 4.6% in the third quarter, said the sharp slowdown was partly due to "the third quarter of last year being very strong and not good results".

"In the main, however, the report shows more clearly the weakness in family spending, if you remember, in the second quarter of seasonally adjusted, it fell significantly compared to the previous quarter," Chanko said in an email.

Final household consumption was 68.2 percent of GDP in the second quarter, down from 75.3 percent in the previous quarter and 73.3 percent in the third quarter of 2021.

Makoto Tuchiya, an economist at Oxford Economics, said higher interest rates due to monetary policy reduce domestic demand.

"While we expect a seasonally consistent home spending recovery in the second quarter, higher commodity prices, supply chain pressures and a weak peso are driving up import prices, which will reduce the purchasing power of real consumers," Tsuchiya said. via email. Address. Letter

Meanwhile, analysts expect a further slowdown in the fourth quarter, raising their annual GDP forecast to 5-7.6 percent.

Suhaimi bin Ilyas, chief economist at Maybank Investment Bank, said GDP growth will slow to 5% in the fourth quarter. Annual GDP growth is expected to be 6.5%, which is the lowest target of the government's plan.

However, the easing of mobility restrictions and the resumption of face-to-face classes in August 2022 (phased and fully implemented in November 2022) could further boost domestic demand and lift fourth-quarter growth ahead of expectations. Elias said in an email.

Pantone's Chanco said it now expects full-year fourth-quarter guidance of 2.8%, which would mean growth of just 5.6% for the full year.

De La Salle University economist Mitzi Irene P.

“Looking ahead, we expect growth to slow in the coming quarters. A global recession, aggressive monetary tightening and government spending cuts will slow GDP growth in 2023, Bank of China Velazquez said.

The government has projected GDP growth of 6.5-8 percent by 2023. - Anna Olivia A Tirona

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