First-quarter GDP growth unchanged at 2.8%

By Justine Irish D. Tabile, Senior Reporter

THE PHILIPPINE Statistics Authority (PSA) on Thursday said it kept the country’s first-quarter gross domestic product (GDP) growth rate unchanged at 2.8%.

Meanwhile, gross national income growth — which measures GDP plus net primary income from the rest of the world — was revised downward to 2.9% from the 3% initially reported.

Growth in net primary income from the rest of the world was lowered to 3.5% from 4.5%.

The PSA also revised figures for several components of the national accounts, particularly on the supply side.

Downward revisions were recorded in other services to 2.9% from 3.9%; electricity, steam, water and waste management to 0.03% from 0.7%; and education to 5.9% from 6.1%.

Meanwhile, manufacturing growth was revised upward to 0.7% from 0.5%; transportation and storage to 5% from 4.4%; and wholesale and retail trade; repair of motor vehicles and motorcycles to 4.7% from 4.6%.

The PSA said it revises GDP estimates based on an approved policy aligned with international standard practices. The revisions came ahead of the release of second-quarter GDP data on Friday (Aug. 7).

Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said the revisions suggest that income flows from abroad were weaker than initially estimated, although the adjustments were relatively modest.

“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,” Mr. Asuncion said in a Viber message.

“That said, the revisions do not materially change the broader narrative. Income from abroad continued to expand even after the adjustment, indicating that external income remained a positive contributor to economic activity,” he added.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the unchanged 2.8% headline masked stronger growth in some domestic sectors and lower contributions from income earned abroad.

“Domestically, faster growth [was] revised for major economic growth engines such as manufacturing, transportation and trade,” he said in a Viber message.

Mr. Ricafort said households and businesses had prioritized essential spending, reduced costs and brought forward some purchases amid the Middle East conflict and expectations of higher inflation and borrowing costs. These adjustments may have provided additional support to manufacturing and trade, he added.

Mr. Asuncion said net primary income from abroad could still provide a buffer against weak domestic growth

“While external income can cushion households and consumption, sustainable growth ultimately depends on domestic investment, employment generation, and productivity improvements,” he said.

TARGET WITHIN REACH
Mr. Asuncion said achieving the government’s 3.5%-4.5% full-year growth target had become more challenging after the weak first-quarter performance, although the lower end remained attainable if growth accelerated during the rest of the year.

“The areas that would need to rebound most strongly are household consumption and investments. Household spending remains the largest component of GDP, making it a critical source of growth,” he said.

“Meanwhile, gross capital formation, which contracted in the first quarter, would need to recover as stronger investment activity tends to generate broader multiplier effects across the economy,” he added.

In the first quarter, household final consumption expenditure grew by 3%, slower than 5.3% a year earlier, and 3.8% in the fourth quarter.

Gross capital formation contracted by 3.3%, reversing the 4.5% growth recorded a year earlier, but the decline was narrower than the 9.4% contraction in the fourth quarter.

“From a sectoral perspective, a stronger performance from industry, particularly manufacturing and construction, would help lift growth momentum. Agriculture, which contracted in the first quarter, also has room to contribute if weather conditions and production trends improve,” Mr. Asuncion said.

“While the services sector is likely to remain the principal growth driver, a more balanced recovery that includes investment-led growth and stronger production sectors would improve the prospects of meeting the government’s full-year target,” he added.