Philippines' First-Quarter GDP Growth Remains Steady at 2.8%

The Philippine Statistics Authority (PSA) announced that the country's gross domestic product (GDP) growth for the first quarter remains unchanged at 2.8%. This figure, while stable, comes amid several revisions to the growth rates of various economic sectors.

Notably, the growth rate for gross national income was adjusted downward to 2.9% from the previously reported 3%. Additionally, net primary income from abroad was also revised downwards, now standing at 3.5% compared to the earlier estimate of 4.5%. These adjustments suggest that income flows from overseas were weaker than initially anticipated, according to Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion.

“The revision implies that compensation of overseas Filipino workers, investment income, or other primary income receipts from the rest of the world contributed less to overall national income growth than first reported.”Ruben Carlo O. Asuncion, Chief Economist, Union Bank of the Philippines

Sectoral revisions revealed a decline in growth for services, which fell to 2.9% from 3.9%. Other sectors such as electricity, steam, water, and waste management saw a significant drop to 0.03% from 0.7%, while education growth was adjusted to 5.9% from 6.1%. Conversely, manufacturing growth was revised upward to 0.7% from 0.5%, and transportation and storage improved to 5.0% from 4.4%. Wholesale and retail trade also saw a slight increase, now reported at 4.7% from 4.6%.

Economists have noted that the unchanged GDP figure masks stronger growth in certain domestic sectors while reflecting lower contributions from income earned abroad. Michael L. Ricafort, Chief Economist at Rizal Commercial Banking Corp., indicated that households and businesses have prioritized essential spending, which may have bolstered manufacturing and trade amidst rising inflation and borrowing costs.

“Domestically, faster growth was revised for major economic growth engines such as manufacturing, transportation and trade.”Michael L. Ricafort, Chief Economist, Rizal Commercial Banking Corp.

Despite the stable GDP growth, achieving the government's full-year target of 3.5% to 4.5% is becoming increasingly challenging, as noted by Asuncion. He emphasized that household consumption, which constitutes the largest component of GDP, must rebound significantly to meet this target. In the first quarter, household final consumption expenditure grew by only 3%, a decline from 5.3% a year earlier.

“While external income can cushion households and consumption, sustainable growth ultimately depends on domestic investment, employment generation, and productivity improvements.”Ruben Carlo O. Asuncion, Chief Economist, Union Bank of the Philippines

Asuncion further highlighted the necessity for gross capital formation, which contracted by 3.3% in the first quarter, to recover in order to stimulate broader economic growth. He pointed out that a stronger performance from the manufacturing and construction sectors could enhance growth momentum, while agriculture, which faced a contraction, has potential for improvement if weather conditions and production trends become favorable.

Looking ahead, preliminary second-quarter growth data is expected to be released soon, with many economists predicting a result below the government's revised target. The median forecast for the April-June period stands at 2.6%, indicating a potential decline from the previous quarter's performance.