The economy maintained a steady growth pace in the second quarter amid external headwinds and weaker capital formation, reflecting its underlying resilience, analysts said on Thursday following the release of official GDP data.
While the latest GDP print hovers at the lower bound of the government’s full-year target range of 5.5 to 6.5 percent, they said the economy’s underlying resilience was anchored on strong household spending and easing inflation.
“Consumption growth at 5.5 percent came in faster than the first quarter’s 5.4 percent and the same period last year’s 4.8 percent,” Japhet Tantiangco, research manager at Philstocks Financial Inc., said.
“This reflects improving household spending amid the robust labor market and easing inflation.”
The second-quarter figures landed slightly above consensus forecasts, Wendy Estacio-Cruz, head of research at Unicapital Securities, said.
“The results underscore the economy’s continued resilience amid external headwinds and tight domestic financial conditions,” she said.
Still, Estacio-Cruz cautioned that momentum would need to pick up in the second half to meet official targets.
“Growth remains at the lower bound of the government’s full-year target, suggesting that stronger fiscal spending and a sustained recovery in private consumption will be crucial,” she added.
Soft spots, global drag
Behind the steady headline number, analysts see signs of softness — particularly in investment activity and government spending.
Capital formation — a key gauge of investment growth — slowed sharply to 0.6 percent, compared with 4.8 percent in the prior quarter and 11.5 percent a year earlier.
Tantiangco attributed the downtrend to weakening business sentiment, “hit with economic headwinds primarily the US’ trade policies.”
Government expenditures also slowed markedly, growing just 8.7 percent, down from 18.7 percent in the first quarter and 11.9 percent a year earlier. The decline coincides with a public spending ban linked to the midterm election period.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., noted that much of the second quarter’s strength came from consumer demand, which accounts for roughly 68 percent of the economy.
He pointed to easing inflation and monetary policy tailwinds as supportive factors: “The BSP rate cuts totaling 125 basis points since August 2024 reduced borrowing costs and helped spur demand for loans, particularly consumer loans, which grew 24 percent year-on-year.”
However, Ricafort also flagged downside risks, including the ongoing US-Philippines trade tension under President Donald Trump, and the full exit of Philippine Offshore Gaming Operators (POGOs) in late 2024.
“These developments partly slowed down some sectors of the economy,” he said.
Exports rise ahead of tariffs
Exports of goods rose 13.6 percent year-on-year, helping push total exports up by 4.4 percent.
Tantiangco said this was driven in part by “frontloading” by exporters ahead of the expected tariff hikes from the United States. The export boost provided a rare bright spot on the external front, which has otherwise remained weak amid persistent global uncertainty, he said.
With inflation easing and the Bangko Sentral ng Pilipinas (BSP) signaling openness to policy easing, analysts see room for a pickup in economic activity — albeit at a cautious pace.
“We see room for an acceleration in growth,” Estacio-Cruz said. “Although the pace may remain moderate given persistent global uncertainties and weak external demand.”
Cristina Ulang, head of research at First Metro Investment Corp., noted that the second-quarter print “boosts the odds of a 25 basis point BSP rate cut this month” — a move that could provide further tailwinds in the months ahead.
