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Analysis and Recommendation
Philippine 3Q GDP growth beat estimates
The Philippine economy grew by 5.9% in the 3rd quarter (3Q) 2023, better than the consensus estimate of 4.7% and picking up from last quarter’s dismal 4.3%. Consumer spending continued to cool as food inflation spikes, with household final consumption expenditure (HFCE) growth slowing to 5.0% from 5.5% last quarter. Gross capital formation also continued to trend lower and contracted by 1.6% YoY as higher interest rates worked its way through the system.
Accelerated government spending picked up much of the slack, with government final consumption expenditure (GFCE) growing by 6.7% from a contraction of 7.1% in Q2. The country’s net import position also narrowed on the back of 2.6% growth in exports coupled with a 1.3% contraction in imports.
Per industry breakdown
Agriculture picked up the pace and grew by 0.9%, from 0.2% last quarter, but still
continued to expanded at a much slower pace than the broader economy. The same is true for Industry, which grew by 5.5%, from 2.1% last quarter. However, there were bright spots in Industry namely “electricity, steam, water, and waste management” (+7.0% YoY) and “construction” (+14.0% YoY). Services remained the pillar of the economy, growing by 6.8% YoY on the back of 14.6% growth in financial and insurance services and 10.1% expansion in professional and business services.
Sectors to watch
Based on the latest GDP figures, we are looking at construction, vehicle sales, power generation, and utilities as some of the key sectors to watch.
Hotel and restaurants, as well as real estate, are showing early signs of recovery but both sectors are still growing at a slower pace than the broader economy. The buoyant banking and financial services sector is starting to show signs of deceleration, although it is still outpacing GDP growth.
The information and communication sector, on the other hand, still faces headwinds and showing signs of slowdown while growing slower than the broader economy at the same time.
GDP Outlook
Overall, this recent GDP report was a good recovery from the previous quarter, but we remain cautious on the Philippine economy as we wait for the recent rate hikes to fully work its way into the system.
With benchmark rates at 6.5%, it is likely that GDP will continue to grow at this lower trajectory of 4.0-6.0% until the BSP starts loosening its monetary policy.
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