Phl economic growth likely slowed in Q3

MANILA, Philippines - Economic growth could have slowed in the third quarter but performance for the whole year would still be far better than 2011, an investment bank said in separate research notes.

Philippine economic expansion could have slowed to 5.5 percent in the third quarter from 5.9 percent in the second quarter and 6.4 percent in the first three months, Bank of America-Merrill Lynch (BofA-ML) said in a report.

“The farm sector and exports may have been particularly weak in (the third quarter) on account of severe weather while services and industrial production aimed at the local economy may have stayed buoyant,” BofA-ML explained.

For the whole of 2012, however, the investment bank said gross domestic product (GDP) could grow at a faster rate of 5.7 percent compared to last year’s dismal 3.9 percent.

The estimate, contained in a report dated Nov. 23, is within the government’s five to six-percent growth goal for 2012. As of the first half, GDP, or the sum of all products and services created in an economy, already expanded 6.1 percent.

For 2013, growth could slow to 5.5 percent, BofA-ML said.

“Our forecast already factors in a strengthening peso which may also soften GDP growth as a strong peso would undermine export growth, the business process outsourcing (BPO) sector, and purchasing power of families dependent on overseas Filipinos’ income,” it explained.

Floods caused by a series of typhoons and southwest monsoon damaged crops and caused farm sector growth to be flat at 1.93 percent as of September, official data showed.

This was despite a 4.3-percent expansion for the third quarter alone, stronger than last year’s 1.59 percent. The agriculture sector, which accounts for a tenth of the economy, is targeted to grow at four percent this year.

While the farm sector is likely to miss its full-year goal, exports sector and remittances are faring well and on track despite a strong peso, which has appreciated by roughly six percent against the dollar this year. A firm peso trims the value of dollar earnings.

National Statistics Office figures showed merchandise exports grew 22.8 percent in September, bringing year-to-date improvement to 7.2 percent. The government targets a nine to 10-percent growth in exports.

Cash remittances, on the other hand, expanded 5.9 percent to $1.838 billion in September, a new monthly record high, the Bangko Sentral ng Pilipinas (BSP) said. This brought the nine-month tally to $15.571 billion, up 5.5 percent.

BSP has a five-percent remittance growth target for the year.

BofA-ML said government spending, which drove growth for the past two quarters, would also “taper off,” thus resulting in a slow down.