The Philippine economy growth slowed more than expected in the second quarter on a sharp fall in government spending, official data revealed Thursday.
Gross domestic product posted a slower annual growth of 4.3 percent in the second quarter after expanding 6.4 percent a quarter ago, the Philippine Statistics Authority reported.
The rate was weaker than economists’ forecast of 6.0 percent. This was also the slowest growth in the current sequence of expansion that started in the second quarter of 2021.
On a quarterly basis, GDP dropped 0.9 percent in the second quarter, in contrast to the revised 1.0 percent growth in the first quarter. This was also in contrast to economists’ forecast for 0.5 percent expansion. Moreover, this was the first contraction in three years.
The expenditure-side breakdown showed that government spending contributed negatively in the second quarter. Government final consumption expenditure plunged 7.1 percent annually and gross capital formation declined marginally by 0.04 percent.
Meanwhile, household consumption and net trade made positive contributions. Household spending increased 5.5 percent. At the same time, exports gained 4.1 percent and imports rose 0.4 percent.
Bangko Sentral ng Pilipinas is set to announce its next monetary policy decision on August 17. The central bank had kept its interest rates unchanged over the last two rate-setting meetings after tightening by a cumulative 425 basis points so far this cycle.
BSP Governor Eli Remolona is likely to consider a pause to rate hikes to provide growth with some support while remaining hawkish in his statement by vowing to hike if upside risks to the inflation outlook materialize, ING economist Nicholas Mapa said.
Despite the weakening economy, concerns about elevated core inflation indicate that central bank is unlikely to start cutting interest rates imminently, economists at Capital Economics said.
Economists forecast the weakness in the economy to continue in the near-term as elevated interest rates and weak global demand weigh on output.
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