Philippine’s third quarter GDP growth hit by disasters

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Philippines_TyphoonThe Philippine economy may have grown slower in the third quarter of 2013 because of the monsoon and typhoon shocks as well as the Zamboanga conflict, according to US banking giant Citi.

In a report, the lender said the country’s gross domestic product (GDP) is projected to grow by 6.9 per cent in the third quarter, slowing from the record 7.5 per cent in the second quarter this year.

“We retain our 2013 GDP growth forecast of 7.3 per cent although recent economic indicators in the third quarter 2013 underscore upside risk,” Citi said, citing the positive export performance in August, strong purchasing power of remittances and buoyant fiscal spending.

The downside risk is likely to come from weak farm output due to the monsoon rains and typhoons, which would dampen farm output, as well as the Zamboanga conflict in the south.

“As the military flushed out the Muslim armed group that hostaged coastal residential communities in the city, business activities ground to a halt while inflicting damage to private property and infrastructure,” Citi said.

Close to 4 billion pesos ($93 million) of budget resources were pledged for rehabilitation and relief in the affected areas to partially offset foregone regional GDP. However, the third quarter GDP growth may probe eight per cent despite these shocks, when money supply eases following 30 percent rise in August, Citi said.

Faster primary fiscal spending would fuel inflation due to spate of flooding and typhoon damage in the August to September period, the rehabilitation and relief aid following military conflict in Zamboanga City and the Bohol earthquake.

As the Bangko Sentral ng Pilipinas (BSP) has not tightened its monetary policy, Citi said Philippine monetary authorities may relent to a peso below P43:$1 in response to inflation increases that come with the yearend remittance season.

Following strong August export growth of 20.2 per cent, Citi said Philippine goods shipments may rise by 7.3 per cent  in the third quarter to snap out of two straight quarterly declines. “Higher net export contribution to third quarter GDP of 2.4 per cent versus our base case estimate of 0.7 per cent could be the potential GDP impact,” the bank said.

“Lacking upside symmetry for imports, the higher net export contribution could yield third quarter GDP growth of 8.8 per cent. This hefty August export gain is unlikely to recur for the rest of the year but it marks a good turning point for exports,” Citi further said. Strong non-tech exports of manufactures and unprocessed goods including agro-based products underpinned upbeat exports.

Another GDP stimulus would be the strong purchasing power of oversea remittances likely to lift household consumption. A weak peso in the July to August period coupled with sustained disinflation in the third quarter enabled the real peso value of remittances to rise by 9.1 per cent in August after a 7.5 per cent rise in July.

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Reading Time: 2 minutes

The Philippine economy may have grown slower in the third quarter of 2013 because of the monsoon and typhoon shocks as well as the Zamboanga conflict, according to US banking giant Citi.

Reading Time: 2 minutes

Philippines_TyphoonThe Philippine economy may have grown slower in the third quarter of 2013 because of the monsoon and typhoon shocks as well as the Zamboanga conflict, according to US banking giant Citi.

In a report, the lender said the country’s gross domestic product (GDP) is projected to grow by 6.9 per cent in the third quarter, slowing from the record 7.5 per cent in the second quarter this year.

“We retain our 2013 GDP growth forecast of 7.3 per cent although recent economic indicators in the third quarter 2013 underscore upside risk,” Citi said, citing the positive export performance in August, strong purchasing power of remittances and buoyant fiscal spending.

The downside risk is likely to come from weak farm output due to the monsoon rains and typhoons, which would dampen farm output, as well as the Zamboanga conflict in the south.

“As the military flushed out the Muslim armed group that hostaged coastal residential communities in the city, business activities ground to a halt while inflicting damage to private property and infrastructure,” Citi said.

Close to 4 billion pesos ($93 million) of budget resources were pledged for rehabilitation and relief in the affected areas to partially offset foregone regional GDP. However, the third quarter GDP growth may probe eight per cent despite these shocks, when money supply eases following 30 percent rise in August, Citi said.

Faster primary fiscal spending would fuel inflation due to spate of flooding and typhoon damage in the August to September period, the rehabilitation and relief aid following military conflict in Zamboanga City and the Bohol earthquake.

As the Bangko Sentral ng Pilipinas (BSP) has not tightened its monetary policy, Citi said Philippine monetary authorities may relent to a peso below P43:$1 in response to inflation increases that come with the yearend remittance season.

Following strong August export growth of 20.2 per cent, Citi said Philippine goods shipments may rise by 7.3 per cent  in the third quarter to snap out of two straight quarterly declines. “Higher net export contribution to third quarter GDP of 2.4 per cent versus our base case estimate of 0.7 per cent could be the potential GDP impact,” the bank said.

“Lacking upside symmetry for imports, the higher net export contribution could yield third quarter GDP growth of 8.8 per cent. This hefty August export gain is unlikely to recur for the rest of the year but it marks a good turning point for exports,” Citi further said. Strong non-tech exports of manufactures and unprocessed goods including agro-based products underpinned upbeat exports.

Another GDP stimulus would be the strong purchasing power of oversea remittances likely to lift household consumption. A weak peso in the July to August period coupled with sustained disinflation in the third quarter enabled the real peso value of remittances to rise by 9.1 per cent in August after a 7.5 per cent rise in July.

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