​A pleasant surprise

PHILIPPINES - In Brief 09 Nov 2021 by Romeo Bernardo

Despite the spike in covid19 infections due to the delta variant and the tightening of lockdown restrictions, the Philippine economy grew at a surprisingly strong 7.1% yoy growth clip in 3Q21, or 3.8% on a sequential seasonally-adjusted basis. The main driver was a 7% qoq growth in household consumption, with a large part of spending growth due to increased purchases of discretionary goods and services.[1] This is surprising considering the health situation and mobility restrictions in 3Q and it is unclear how much of this is due to pent-up spending (i.e., one-off) unleashed by rising vaccination coverage. Other demand-side drivers included government consumption as well as public and private investments particularly in construction. Increased exports of goods and services was more than offset by much higher imports. Meanwhile, the supply side accounts showed that output growth was led by services (8.2% yoy), with seasonally adjusted qoq growth rates higher in seven of the 11 sub-sectors, followed by industry (7.9%), with value added expanding in manufacturing and construction. Agriculture in contrast contracted during the quarter.

At the start of the year, we had forecasted economic growth to reach 5.5% this year. Repeated lockdowns and the emergence of the delta variant led us to cut this number to 3.5% last quarter. The 3Q outperformance brought average GDP growth so far this year to 4.9%. With rapidly declining infection counts and more easing of mobility restrictions recently, we are expecting further improvements in activity in 4Q and are ...

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