El Niño and successive storms blamed for slower growth

MANILA (UPDATE) -The Philippines' gross domestic product expanded 5.2  percent in the third quarter, the Philippine Statistics Authority said on Thursday.

This was lower than the revised 6.4 percent growth posted in the second quarter and the 5.8 percent clip seen in the first quarter. This brought the average growth rate for the first three quarters of the year to 5.8 percent.

National Economic and Development Authority Secretary Arsenio Balisacan said that for the country to meet the lower end of its target growth 6 to 7 percent for 2024, the economy needs to grow 6.5 percent in the fourth quarter.

Balisacan said that the slowdown was partly due to a contraction in agriculture and a moderation of growth in industry and services. He said agriculture was affected by the El Niño phenomenon in the earlier part of the year and then the successive storms and the rains brought on by the habagat or Southwest monsoon that hit the country in the middle of the year.

Bad weather also affected fishing, aquaculture and livestock production, Balisacan said. The successive typhoons also slowed down growth in industry and services as they caused work and class suspensions resulting in administrative delays and supply chain disruptions.

Tourism also took a hit as weather disturbances limited domestic mobility. Public construction was also affected due to administrative delays and disruptions associated with adverse weather conditions. Exports also slowed down, especially for electronics, amid global inventory corrections, he said.

Meanwhile, Balisacan noted that on the positive side, private construction, which powered growth in the second quarter, sustained double-digit growth of 11.9 percent from 10.3 percent. Domestic demand growth remained robust at 6.6 percent in Q3, though a bit slower than 7.4 percent in Q2.

"Household spending accelerated to 5.1 percent in Q3 2024, which was encouraged by slower consumer price inflation," he said.

The NEDA chief said that easing inflation and interest rates may still help the economy hit the government's growth target for the year.

"We remain optimistic that this growth target is attainable. We anticipate increases in holiday spending, more stable commodity prices, even low inflation, lower interest rates, and a robust labor market," the country's chief development economist said.

He also noted that the unemployment rate has gone down.

“They're favorable for the quarters ahead. With the decrease in inflation, you would expect domestic consumption, household consumption to continue its upward momentum,” he said.

Meanwhile, recovery efforts in the areas affected by typhoons will drive economic activity, he added.

"We expect these interventions to spur growth in private spending, particularly on big-ticket consumer items and investments in capital-intensive infrastructure," Balisacan said.

Inflation has been a nagging concern for economic managers as it has put a damper on growth in the past years, but price increases have been stabilizing this year within the government target range of 2 to 4 percent.

The slower inflation has allowed the Bangko Sentral ng Pilipinas to cut interest rates by a cumulative 50 basis points so far this year, bringing the benchmark rate to 6 percent from 6.5 percent at the start of the year.

BSP Governor Eli Remolona has said that if conditions are favorable, the central bank may cut rates by another 25 bps in December.

Manny Ocampo, senior managing director at ICCP, said he was not expecting the GDP print, noting that he was expecting economic growth figures of around 6 percent.

“To bring things into context, the third quarter, that's really our typhoon season, so you know expectations of maybe a weaker agri contribution will be there, because that's par for the course during that during this time of the year,” he said.

 “I think what was more disappointing is maybe the continued, you know, government holding back on spending that people have been looking for, and they've never executed on that. So I think that's something that's more worrisome, and that's something really government had a hand in,” he stressed.

 Ocampo said he is “not too confident” about the government hitting its 2024 economic growth targets.

 “Agriculture will continue to be challenged. I don't see new government spending there. There's some spending, but it stopped kicking in.”

 “And maybe next year, towards the election, you'll see more a more active government spending program there,” he said.