May 28, 2015

GDP growth for 4Q14 revised down to 6.6%

2014 GDP maintained at 6.1%: The Philippines’ real GDP growth for 4Q14 was revised down to 6.6% from the 6.9% advance estimate released in Jan. In spite of the revision, the 2014 full year GDP growth remained unchanged at 6.1%. There were upward revisions to the growth in two of the four quarters. The 2Q14 growth was revised upward to 6.7% from 6.4% while 3Q14 growth now stands at 5.5%, up from 5.3% previously.

Growth for 1Q14 was maintained at 5.6%. Net Primary Income (NPI) was also revised downward to 4.1% from 7.3% resulting in the downward revision of Gross National Income (GNI) to 5.7% from 6.3%. Meanwhile, the annual 2013 GDP growth figure was revised downward to 7.1% from 7.2%. NPI was revised upward to 13.1% from 9.0%, which consequently resulted in the upward revision of GNI to 8.1% from 7.5%.

The Philippine Statistics Authority said the 4Q14 changes were due to downward revisions in trade (to 3.4% from 5.3%); other services (to 1.8% from 2.5%); and electricity, gas, and water supply (to 5.1% from 6.3%).

The downward revision can also be accounted to changes in the pace of household and government consumptions. Household consumption, a more stable indicator, was revised downward to 5.0% from 5.1% but still represents an improvement from 3Q14, which was lowered to 4.9% from 5.0% previously. Government consumption grew by 9.4%, lower than the preliminary estimate of 9.8% but a reversal from the 2.5% (revised from 2.6%) contraction posted in 3Q14.

On the other hand, capital formation, which includes inventories, was revised upward to a 3% growth in 4Q14 from a contraction of 4.9%. Inventories came in higher than initially estimated, as did intellectual property products, which grew 6.8% vs. the preliminary estimate of a 14% contraction.

Our take: Despite the downward revision, the country’s 4Q14 GDP was still ahead of market expectations, exceeding the quarter average growth forecast of 6% of analysts. The revisions are being released to coincide with the announcement of the advanced 1Q15 GDP data later this morning.

Market consensus puts 1Q15 GDP growth at 6.4%, near the low end of the consensus range of 6.0% - 7.3%. While government spending for the quarter came in below target, up 4.5% in 1Q15, spending levels from Jan to Mar has actually shown an increasing trend. From a 5.4% contraction in Jan, government spending rose to 9.6% in Feb and 11.2% in Mar.

The budget secretary, in a statement to the press, said the second quarter of the year should continue to show this trend. This should provide a boost to GDP growth in the succeeding quarters. The government is looking at GDP growth of 7%-8% this year. - WealthSec