Consumption is seen to remain among the major growth drivers of the Philippine economy and counter the impact of negative developments overseas.
In a research, HSBC economist Joseph Incalcaterra said that consumption, which accounts for more than 70 percent of domestic output, continues to be boosted by inflows from Filipinos overseas and the sustained drop of unemployment.
The government’s decision to increase infrastructure spending is also helping, it said, citing that this does not only increase spending but also government consumption.
“Taken together, Philippine domestic demand often largely offsets the external sector’s (net exports) negative contribution to growth. We believe this trend is likely to continue in the foreseeable future, resulting in the Philippines relatively insulated to external growth risks,” it said.
While growth of private consumption decelerated slightly in the third quarter of 2017 at around 4.5 percent from its long-term growth of five percent, the study discounts this to be long-term.
“We believe this is primarily due to idiosyncratic factors such as the sharp fall in remittances in September and the high consumption base from the previous year,” it said.
The report even pointed out that the lower-than-expected rise of September 2017 remittances “could signal some payback for the year-end with higher-than-usual transfers, considering remittances growth has overall been quite robust in 2017.”
“Thus, we expect private consumption growth to lift back up above its long-term trend in 4Q and to stay there for the rest of 2018,” it said.
BangkoSentralngPilipinas (BSP) data show that total remittances last September alone contracted by seven percent to USD2.44 billion from a growth of 9.4 percent in the previous month.
Cash remittances also declined by 8.3 percent from a growth of 7.8 percent last August.