Philippines: GDP surprised to the upside in Q2 – UOB

Senior Economist at UOB Group Julia Goh and Economist Loke Siew Ting review the latest GDP figures in the Philippines.

Key Takeaways

“The Philippines’ real GDP growth unexpectedly accelerated further to 7.6% y/y in 3Q22 (from an upwardly revised 7.5% in 2Q22 vs 7.4% previously) as a result of further reopening of economic and social activities, higher minimum wages from 16 Jul 2022, and improving job opportunities during the quarter. The 3Q22 GDP growth reading defied our and market’s expectations for a deceleration to 6.8% and 6.2% respectively.”

“We tweak our 2022 full-year GDP growth estimate higher to 7.4% (from 7.0% previously) to reflect a stronger economic expansion of 7.7% in the first nine months of 2022 and a slower growth of 6.5% for 4Q22. The weaker outlook for 4Q22 mainly takes into account the impact of adverse weather and natural disasters striking the country at the end of the year as well as diminishing purchasing power. For 2023, we stick to the view that the economic growth will taper off further to an average of 5.0% given heightened global headwinds, restrictive BSP policy and expectations for more permanent inflationary pressures.”

“Prior to today’s robust 3Q22 GDP data and a nearly 14-year high of inflation outturn last Fri (4 Nov), BSP had on last Thu (3 Nov) pre-announced a 75bps rate hike. This will bring the overnight reverse repurchase (RRP) rate to 5.00% effective from 17 Nov. In response to the BSP’s strong intention to keep pace with the US Fed’s actions, a potentially higher terminal US interest rate by 1Q23 and persistent upsides risks to the nation’s inflation outlook, we had raised our BSP outlook last Thu (3 Nov) with a RRP rate of 5.50% by end-2022 and 6.00% by end-2023.”