Q1 GDP grew 6.4%

PHILIPPINES - In Brief 11 May 2023 by Romeo Bernardo

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It was a good start for the Philippine economy, growing 6.4% in Q1 2023 and beating analysts’ median forecast of 6.1%. A quick look at the numbers suggests that pandemic-induced pent-up demand is still the major driver. The 6.3% growth in private consumption, which accounted for 3/4s of GDP growth, was itself driven by continuing double-digit growth rates for restaurants and hotels, transportation and recreation and culture. These partly reflect the strengthening tourism sector, particularly among domestic travelers. The performances of other demand-side components were unremarkable. The 12% growth in investments reflect selective expansion in durable equipment (notably in power and road transport), continuing recovery in private construction activity (which however remains below pre-pandemic Q1 2020 level) and inventory accumulation. In line with fiscal consolidation goal, public consumption and construction grew at modest single-digit rates (6.2% and 4.7%, respectively). A wider trade gap, reflecting a sharp contraction in goods exports (-15%), continued to be a drag on overall growth. Meanwhile on the supply side, output was driven mainly by a strong 8.4% services sector, mirroring consumption demand. Industry, particularly manufacturing slowed palpably reflecting the drop in exports, while agriculture managed to grow marginally. In our Forecast report last quarter, we upgraded our GDP forecast for the year from 5% to 5.5% mainly to take into account the robust spending momentum we saw at year-start, plus some positive news on the external front associated with China’s re-opening. With pent-up demand expected to ease, we still expect overall growth to moderate in th...