- Weak consumer spending offsets rebound in exports
- Inflation dampens domestic demand
- Economy remains resilient, says economic minister
- Q1 reinforces expectations policy rates to stay on hold
MANILA (Updated 4:40 p.m.) — The Philippine economy accelerated less than expected in the first quarter as weaker consumer spending restrained growth, reinforcing expectations that the central bank will leave interest rates unchanged next week, despite rising inflation.
Gross domestic product grew 5.7% in the first three months from the same period last year, the statistics agency said on Thursday, up from the previous quarter’s 5.5% but below the 5.9% forecast in a Reuters poll.
The Southeast Asian nation’s government remains optimistic about growth, said Economic Planning Secretary Arsenio Balisacan, including a strong rebound in exports fuelled by a recovery in shipments of electronic products.
“Despite our challenges on both domestic and international fronts, our economy continues to demonstrate remarkable resilience and growth,” Balisacan told a press conference. “We are in good shape.”
On a seasonally adjusted basis, growth slowed to 1.3% from 2.1% in the previous three months, although this was above the 1.0% growth forecast in the Reuters poll.
Balisacan expressed confidence the economy can hit the government’s 6.0%-7.0% full-year growth target, but not everyone shared the minister’s optimism.
Capital Economics stuck to its 5.5% growth forecast for 2024, saying in a note that an anticipated global slowdown could dampen export demand and remittances from Philippine workers overseas, a key driver of consumer spending.
Inflation quickened for a third straight month in April, continuing to curb domestic demand, which grew 4.6% in the first quarter, the weakest since a 4.8% contraction in the first quarter of 2021.
“The weaker domestic demand picture, coupled with moderate overall growth, strengthens the case that the central bank is likely to maintain current interest rates at its upcoming meeting,” Robert Dan Roces, chief economist at Manila-based Security Bank, said in a note.
The central bank, which meets on May 16, has held its benchmark rate PHCBIR=ECI at a 17-year high 6.5% at its last four meetings.
— Reporting by Neil Jerome Morales and Mikhail Flores in Manila; Writing by Karen Lema; Editing by John Mair and William Mallard