Philippines: Q2 GDP surprised to the upside – UOB

Senior Economist Julia Goh and Economist Loke Siew Ting at UOB Group comment on the recently published GDP figures in the Philippines.

Key Takeaways

“The Philippines’ economy held up its strong growth momentum with 2Q22 GDP growing 7.4% y/y (1Q22: revised down to +8.2% from +8.3% previously). The reading exceeded our estimate (+6.3%) but came in below Bloomberg consensus (+8.4%). It was largely credited to the easing of COVID19 restrictions on mobility, election-related spending, and continued government policy support during the quarter.”

“We raise our 2022 full-year GDP growth forecast to 7.0% (from 6.5% previously, official est: 6.5%7.5%), purely reflecting the robust economic growth of 7.8% in 1H22. For 2H22, we continue to expect the growth momentum to be considerably held back to around 6.4% as headwinds to growth have intensified. To counter lingering downside risks, a safe full reopening of the economy with higher national vaccination rates against COVID-19, broad policy continuity post presidential elections, and resilient overseas cash remittances are key to sustain the growth momentum in the near term.”

“Both the upbeat inflation for Jul and 2Q22 GDP numbers justify a continuation of monetary policy normalisation this month (Aug) after the unscheduled 75bps hike last month (14 Jul) and two back-to-back increases of 25bps each in May and Jun. We have revised our BSP rate call last Fri (5 Aug) for a 50bps hike in the RRP rate to 3.75% on 18 Aug (vs 25bps previously).”