News Update Economists downgrade PHL output forecast on 'lethargic' Q3 GDP

Economists were quick to scale down their Philippine economic forecasts following what the National Statistical Coordination Board said was a “lethargic” growth of 3.2 percent in the third quarter output. Nomura Global Economics contributing economist Euben Paracuelles said in the company’s “Asia Economic Alert” — released late Monday — it is unlikely that government’s Disbursement Acceleration Plan will be enough to achieve full year growth within the target range of 4.5 to 5.5 percent. “Growth in the first three quarters was only 3.6 percent, which implies that Q4 growth needs to more than double to 7 percent year-on-year, just to achieve the low end of that forecast,” Paracuelles said. Global Source Partners on Tuesday dropped eight-tenths of a percent from its 4.3 percent projection. In its market brief, “Philippines Stuck in Lower Gear,” the New York-based think tank said with “the gloomy global outlook and weak local drivers, fourth quarter performance will likely be no better which leads us to cut our growth forecast from 4.3 percent to 3.5 percent this year and from 4.8 percent to 4.5 percent the next.” 'Lethargic growth' The NSCB said on Monday the 3.6 percent of nine-month growth is "quite a distance even from the lower end of the whole year target of 4.5 percent." Exporters suffered a 16-percent decline in earnings while the construction sector shrunk by 7.2 percent in the third quarter (Q3) compared to the July-to-September period of 2010, according to the NSCB. These industries' woes resulted in a -0.2 percent decline in the output of the industry sector, which accounted for 31.34 percent or about one-third of gross domestic product in Q3, NSCB data showed. "The so-called death spiral of debt that hounds our trading partners, the uninvigorating, albeit already expanded government spending, and the decline in fishing due to unfavorable weather and the high cost of fuel contributed to this relatively lethargic growth," NSCB secretary-general Romulo Virola said. "On the demand side, consumer spending bolstered growth but construction continued to suffer from the much delayed implementation of the Public-Private Partnership program while export of goods really got hit by the global crisis, posting a double-digit decline for the first time since the second quarter of 2009," the NSCB said. Construction managed to pump a third quarter output of P446.3 billion due to "the uninvigorating, albeit already expanded government spending" of the Aquino administration. Exporters' earnings fell to P550.89 billion in July to September this year versus P656.86 billion in Q3 of 2010. "The Agriculture, Hunting, Forestry and Fishery sector declined hugely by 3.9 percent," the NSCB said, "as climate disturbances wrought havoc to the sector." Services sector saves economy Services sector firms and entrepreneurs "saved the domestic economy from posting an even lower growth" by registering a 5.3 percent growth rate at a Q3 output of P825.63 billion, according to the NSCB, noting that services was responsible for 58 percent of the third quarter output. NSCB said, "the robust growth of the services sector by 1.2 percent during the third quarter 2011, bailed out the economy from the nosedive of the agriculture, hunting, forestry and fishing sector." "The boost to the sector was led by real estate, renting and business activities, other services and public administration and defense. All subsectors have posted positive growths for the last two quarters," the NSCB noted. The gross domestic product, which measures the total output of the local economy, reached P1.4 trillion in the third quarter and 69 percent of it came from consumer spending while government spending accounted for only 9.8 percent. NEDA chief hopeful still Socioeconomic planning Secretary Cayetano Paderanga Jr. in a statement issued Monday afternoon, remains optimistic despite the "lethargic growth" as observed by the NSCB. "Notwithstanding the third quarter’s moderate growth, there are indications of more favorable prospects for the fourth quarter of 2011. These include the following: anticipated higher demand on account of the Yuletide and harvest seasons; a more stable macroeconomy; a broadly steady consumer sentiment; the continued inflows of remittances from Filipinos overseas," Paderanga said. "Public construction and government consumption and services are likely to pick-up in the coming quarters due to quick releases and faster utilization of the P72-billion Disbursement Acceleration Program," the director-general of the National Economic and Development Authority said. — With Earl Victor Rosero/VS/KG,