Philippine growth likely to return to 6% pace in 2Q14

Export growth improved, even if only modestly.

While the results for the Philippines’ 2Q14 GDP are awaited, market forecasts are all over the place, suggesting that the details are probably more important than the headline number.

According to a research report from DBS, it expects GDP growth to have eased to 5.5% YoY in the period, from 5.7% in 1Q14.

However, the headline annual number is likely to have been distorted by high base effects, the report said. Indeed, on sequential terms, GDP growth is likely to return to a 6% pace in 2Q14.

Here’s more from DBS:

Export growth has improved, albeit only modestly, from a disappointing 1Q14.

Private consumption is showing no sign of a significant moderation.

About the only drag in the period has stemmed from slower fiscal spending.

While revenue collection picked up pace in 2Q14, the pace of expenditure has gone in the other direction.

Fiscal spending slipped below the 10% mark again in 2Q14, after a pretty strong 12% in 1Q14.

Bangko Sentral ng Pilipinas (BSP) remains confident of the GDP growth outlook going forward, especially since the government is set to accelerate its fiscal spending.

7% GDP growth target in 2015 is totally beyond reach but would require strong investment growth in the upcoming quarters.

Meanwhile, resilient domestic demand coupled with supple-side pressures has led to concerns that inflation may overshoot target in 2015.

Expect the central bank to do another 25bps hike in September before leaving the rate steady at 4% thereafter.