Philippines on track to reach economic target

Economic expansion is still on track to reach the government’s target of 5-6% despite an external drag on growth in 2H, says DBS.

DBS Group Research noted:

Export numbers are out tomorrow and the headline figure is expected to grind along at 2% YoY in May, down from 7.6% in the preceding month.

Essentially, the April growth figure was probably skewed to the upside and is unlikely to be sustained. During that month, electronics exports (which usually form the bulk of outbound shipments) fell by 23.8% YoY, however, this drag was more than made up for by a 91.5% surge in exports for the ‘others’ category (2004 PSCC classification). Without the surge in that category, headline growth would have been negative.

At this point, it is far from clear that this spike in exports can be maintained and we have assumed that this is a one-off jump. Against the backdrop of slowing global growth, the outlook for exports has become considerably cloudier.

The temporary rebound in electronics exports in the early part of the year has tapered off as inventory restocking ran its course. With final demand not likely to pick up, the value of electronics exports is likely to go largely sideways for the next few months.

Despite an external drag on growth in 2H, economic expansion is still on track to reach the government’s target of 5-6%.