Angelo Taningco
Economist, Treasury Group

Philippine economic expansion has been robust in the second quarter (Q2) of the year, as its real gross domestic product (GDP) growth stood at 6.5% year-on-year (yoy), matching our forecast and slightly above its first quarter (Q1) figure of 6.4% yoy, according to the Philippine Statistics Authority (PSA) latest GDP report released on 17 August.

On the demand side, the major growth drivers in Q2 were household consumption, capital formation, and government spending. Household consumption grew 5.9% yoy, contributing 58% to real GDP growth. Capital formation expanded 8.7% yoy, accounting for 34% of the economic expansion. Government spending surged 7.1% yoy and this comprised 13% of the economy’s growth. Meanwhile, net imports of goods and services widened 8.3% yoy, and this weighed on GDP growth for the quarter. (See Figure 1)

Figure 1: Real GDP Growth, Expenditure Side
Q1 2015 – Q2 2017
(yoy %)

On the supply side, the services sector contributed 54% to real GDP growth in Q2, posting an increase of 6.1% yoy. Both trade and real estate subsectors have largely influenced services growth. Industry recorded 7.3% yoy expansion in Q2, representing 38% of economic growth, and manufacturing led all industry subsectors with a 7.9% yoy increase. Agriculture, hunting, forestry, and fishing gained 6.3% yoy in the quarter, and accounted for 8% of GDP growth. (Figure 2)

Figure 2: Real GDP Growth, Production Side
Q1 2015 – Q2 2017
(yoy %)

In the first half (H1) of the year, real GDP grew 6.4% yoy, also consistent with our forecast. This was lower than the 6.8% growth registered in the second half of the previous year. The major growth drivers in H1 were household consumption and capital formation as well as industry and services.

We continue to believe that the Philippine economy will sustain its above 6% growth for the remaining quarters of the year. Against this backdrop, we maintain our 2017 GDP growth forecast of 6.4% yoy.

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