The country’s Grosss Domestic Product (GDP) rose by 6.3% year-on–year (y-y) in 2Q24, in line with consensus estimates and an acceleration compared to the 5.8% growth in the 1st quarter (1Q) of 2024. <\/p>\n\n\n\n
A pick-up in growth in Construction & Transportation and Real Estate & Ownership of Dwellings more than offset the slump in Agri, Financial\/Insurance activities and Manufacturing.<\/p>\n\n\n\n
We also note a significant acceleration in Govt consumption (10.7% vs. 1.7% in
1Q 2024) and Gross Capital Formation (11.5% vs. +0.5%). Meanwhile, Household Consumption was stable at 4.6% as the effect of revenge spending continued to fade.<\/p>\n\n\n\n
We expect the recovery to be sustained into the 2nd half (2H) of 2024. The stronger push for govt infra projects should boost public construction while the pick-up in real estate activities should buoy private construction. The draw downs on capex financing alongside higher working capital requirements as indicated by the banks signal an improvement in business sentiment. Also, GDP growth during the three quarters preceding an election usually get an extra boost due to increased spending.<\/p>\n\n\n\n
We upgrade our 2024 GDP growth forecast to 5.9% (from 5.7%) to factor in the strong 2Q 2024 growth, easing inflation and looming rate cuts which should boost consumption. Our upgraded GDP growth forecast for the year looks conservative given that 1H 2024 average growth is tracking higher already. <\/p>\n\n\n\n
The stronger GDP growth should not dissuade the BSP from cutting its rate soon as there\u2019s a need to boost consumption which is lagging behind. Fading macro headwinds and a pick-up in economic activities should benefit cyclicals, specificall the Banking and Property sectors. <\/p>\n\n\n\n
Our top picks: ALI, RLC, MBT, BDO and BPI.<\/p>\n\n\n\n