September 02, 2015

GDP grows 5.6% in 2Q15

The country’s gross domestic product grew 5.6% in 2Q15 from the revised 5% in 1Q15 and 6.7% in 2Q14, according to data released by the government yesterday. This brings the 1H15 GDP growths at 5.3% vs. 6.2% in 1H14.

By sector, growth accelerated in the industry (+6.1% in 2Q15 from 5.5% in 1Q15) and services (6.2% from 5.4%) and made up for the slowdown in the agriculture, fishery and forestry (-0.5% from +1.1%). The most notable growth in the industry sector were registered by construction (+14.6% from 5.4%) and mining (+2.4% from -3.1%). These made up for the slowdown in manufacturing (+4.6% from 6%) and electricity, gas and water (+3% from 5.1%).

By expenditures, household consumption sustained its momentum with a 6.2% growth from 6% in 1Q15 given further gains in food and non-alcoholic beverages, a major turnaround in clothing and footwear, and consumption of miscellaneous goods and services (mostly electronic devices and gadgets) which surged by 10% in 2Q15 from 3.8% in 1Q15. Capital formation also grew by 17.4% in 2Q15 from 11.6% in 1Q15 on the resurgence of public construction (+20.4% from -24% in 1Q15) as government accelerated spending and was aided further by the 10.2% growth in private construction. This made up for the decelerations in exports (3.7% from 6.4%) even as imports picked up pace at 12.7% vs. 8.7%.

Our take: The 5.6% 2Q15 growth sits well with the 5.58% consensus forecast based on a BusinessWorld survey. The 5.3% 1H15 GDP growth renders the government’s 7%-8% target unlikely to be achieved. The country’s economic planner has said that government is now reviewing its target and that a 6%-6.5% growth might be more realistic. At any rate, the numbers show that the key investment themes that underpin the outlook for the market remain intact. These included consumer spending and government spending which should further gain pace in the next several quarters on hastened infrastructure spending and election-related spending. – WealthSec