Angelo Taningco
Economist, Treasury Group

Philippine agricultural production—which accounts for 10% of GDP—last quarter posted its lowest yoy growth rate since first quarter (Q1) of last year, consistent with our view that this may have dampened this year’s Q1 economic growth. The relatively weak agricultural performance compared to previous quarter was a result of growth slowdown in crops production and a bigger contraction in fishery subsector that was partly offset by better output from livestock and poultry subsectors. We maintain our Q1 GDP growth estimate of 6.7%, which is a notch lower than the market’s median forecast (6.8%) and below the government’s target range of 7%-8%.

Agricultural output expanded 1.5% yoy in Q1, slower than last year’s fourth quarter (Q4) growth of 2.2% and full-year 2017’s 4.0%. Crops—which contributed 54% to agriculture sector’s production—grew 1.8% yoy in Q1 led by relatively strong output growth of corn and palay; however, this was an easing from its 2.7% Q4 growth and 6.7% increase for the full-year 2017. Fisheries (13% share) contracted 4.6% in Q1, a bigger drop from its 1.2% dip in Q4 and 1.7% fall in 2017. Livestock (17% share) gained 2.1% yoy in Q1 led by hog production, an improvement from its 1.8% growth in Q4 and 1.1% 2017 growth. Poultry (16% share) produced 5.2% more in Q1 on the back of bigger output of chicken, allowing it to accelerate from its 4.7% expansion in Q4 and 4.6% growth in 2017.

Despite last quarter’s relatively modest performance of the agricultural sector, we still expect Q1 GDP growth to be reinforced more by manufacturing, public construction, and services sectors. Manufacturing production, which accounts for 19% of GDP, exhibited double-digit growth during the first three months of the year. Similarly, government’s disbursements for infrastructure and capital outlay projects expanded more strongly in Q1, and this, we think, may have likely led public construction (3% of GDP) to again record another double-digit growth pace. Meanwhile, we expect the services sector (60% of GDP) to record relatively steady growth in Q1 on the back of wholesale and retail trade, finance, and real estate.

Figure: Agricultural Production

(yoy %)

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