First quarter economic growth disappoints

Manila, Philippines - Philippine economic growth picked up pace in the three months ending March from the quarter before, underpinned by cooling inflation and frontloading of state spending ahead of the May midterm polls, the Philippine Statistics Authority (PSA) said on Thursday.

First quarter gross domestic product – or GDP, the value of all goods and services produced within a country’s borders – rose by 5.4% year-on-year, PSA data showed.

That GDP print was a tad faster than 5.3% pace registered during the October-December 2024 period, and was below market expectations. A Reuters poll earlier put first quarter GDP growth at 5.7%, and BusinessWorld at 5.8%.

Still, President Ferdinand Marcos Jr.’ economic team said the 5.4% clip means the economy “showed signs of steady growth,” fending off headwinds from uncertainties in global trade policies.

“This first quarter is not quite a disappointment,” Rosemarie Edillon, undersecretary at the Department of Economy, Planning and Development (formerly NEDA), told a press briefing.

“There are many layers to it,” she added.

Easing inflation supported household consumption, she said. Consumer spending, or personal consumption expenditures, and a heavyweight in the government’s national accounts, outpaced last year’s average to begin the year at a 5.3% clip fueled by slowing rice and food inflation.

Government expenditures meanwhile grew by the double digits - an annual 18.7%, reflecting cities and municipalities stepping on the gas in terms of disbursing public funds for roads and infrastructure before a 45-day election spending ban took effect on March 28.

ONE-OFF?

Edillon said the economic team will review the “first-quarter numbers and look at our assumptions for the rest of the year” to determine if the pillar from state spending will hold out enough to steer growth towards the official full-year goal of 6% to 8%.

“Investments in durable equipment which also made up a huge bulk of imports are really on capital equipment, like transport equipment, electrical equipment. These are the things that probably will no longer be needed for the rest of the year,” Edillon said.

“So we will have to go back and see which ones are really just one-off increases in imports and which ones are actually needed for future growth,” she pointed out.

Still, Edillon is bullish about growth prospects dousing concerns that the frontloading early this year would mean state-sponsored large-scale spending might taper off.

“For the entire year of 2025, there will still be substantial growth from government final consumption expenditure just looking at the disbursement program for the year,” the DepDev official said.