Economists cut targets after slower Q2 growth

MANILA   -Market analysts have ratcheted down their full-year growth forecast for the output of the Philippine economy following a second-quarter letdown of 4.3 percent, which they consider as a sign that the government’s target is too ambitious.

The Marcos administration’s economic team insisted that their goal of 6 percent to 7 percent gross domestic product growth for 2023 was “still achievable.” For this to happen, GDP must grow by 6.6 percent in the second semester.

Nalin Chutchotitham, Citi group’s economist covering the Philippines, said in a research note that in the second semester this year, they expect gross domestic product growth to gradually pick up pace as easing inflation and continued strength in the labor market and minimum wage hikes would support consumer spending.

Outlook threatened

“However, global slowdown and potential impact on agriculture production from El Niño could remain downside risks to growth outlook” in the second half of 2023 and in 2024, Nalin said.

Thus, Citi revised down their forecast for 2023 to 5.2 percent from 5.9 percent previously, “mainly from the disappointing” second quarter results.

‘Disappointing results’

Goldman Sachs said that with the second quarter readout, they were again revising downward their full-year forecast—now at 5.3 percent, coming from 5.6 percent previously and 5.9 percent before that.

BofA Securities did so, too, to 4.8 percent from 5.5 percent. The group said the new forecast implies that GDP growth in the second semester will be 4 percent.

“While it may be argued that second quarter 2023 is being compared to a year-ago base that included election- related spending and residual COVID-relief mitigation, the decline in government spending can hardly be justified in the context of the full-year 2023 national budget that implies at least 5 percent nominal growth,” BofA Securities added.

Fitch group subsidiary BMI revised their own forecast to 5.3 percent from 5.9 percent, noting that the new figure was lower than the consensus forecast of 5.5 percent.

“The [Philippine] economy will continue to face several headwinds including high interest rates, the weak external sector as well as adverse weather conditions,” BMI said.

Likewise, Pantheon Macroeconomics slashed their full-year forecast to 4.5 percent from 5.5 percent, declaring that the second-quarter readout was “a disaster.” It pointed out that the economy shrank by 0.9 percent compared to the first quarter this year. INQ

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