2Q GDP growth slows to 7.4%

PHILIPPINES - In Brief 09 Aug 2022 by Romeo Bernardo

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The Philippine Statistics Authority reported today that GDP grew 7.4% year-on-year (yoy) in 2Q. The relatively high headline growth number continues to reflect base effects, i.e., impact of pandemic and lockdowns on last year’s GDP, and is roughly in line with the 7.5% median forecast of analysts. Nonetheless, compared with 1Q, output actually stalled with the quarter-on-quarter (qoq) growth rate slightly down (-0.1%). The level of 2Q output is just about equal to its pre-pandemic level (i.e., +0.1% over 2Q 2019), revealing the economy’s slow recovery from the pandemic. Based on the demand side accounts, the slowdown in 2Q growth mainly reflects: (a) a significant cut in private consumption (-2.7% qoq), likely reflecting both rising inflation and the waning effects of 1Q’s strong election stimulus; and (b) a sizeable (+23%) widening of the trade-in-goods deficit (from 17.6% of GDP to 20%) with exports declining alongside slowing global demand and imports still growing at double digits. On the other hand, helping to prop up domestic output was government consumption and construction which grew almost 15% yoy in 2Q compared with less than 2% yoy in 1Q, probably due to timing effects of certain election-related spending[1]. There was also some uptick in private investments, especially in continuing inventory buildup and road transport equipment following the opening of the economy. Meanwhile, supply side accounts showed significant slowdown in industrial output (+0.2% qoq) and a decline in services (-0.4% qoq). Despite the 2Q growth slowdown, Planning Secretary Arsenio Balisacan still expressed confidence in the government’s 6.5% to 7.5% full year growth target, telling r...