Philippines: GDP surprised to the downside in Q2 – UOB

The Philippines’ real GDP growth decelerated at a faster-than-expected pace to 4.3% y/y in 2Q23 (from +6.4% in 1Q23), marking the third quarter of growth slowdown and the smallest gain since 1Q21. The reading undershot our estimate of 5.0% and Bloomberg consensus’ 6.0%, as a result of tighter monetary policy and subdued global demand amid year-ago high base effects.

All sectors posted weaker performance in 2Q23, led by services, manufacturing and construction industries. Falling government spending, a setback in investment gains and stock withdrawal activities were key factors pulling down the overall GDP growth more than expected in 2Q23, despite positive net trade contribution and moderate household consumption in the face of higher interest rates environment and elevated inflationary pressures.  

We continue to expect a softer economic growth outlook for 2H23, with a slower real GDP expansion of 4.6% (vs +5.4% in 1H23). This is mainly premised on uncertainties surrounding the global food and energy prices, geopolitical tensions, China’s post-pandemic economic recovery, and an expected downturn in advanced economies, which will further impact global demand, investments and inflation prospects. Year-ago high base effects will also weigh on the Philippines’ growth momentum in 2H23, together with the lagged effects of restrictive monetary policy and adverse impact of recent typhoons striking the country. For now, we keep our 2023 full-year GDP growth forecast of 5.0% (official est: 6.0%-7.0%, 2022: 7.6%) with downside risks.