The Philippine economy continued to perform solidly in the three months to September. While GDP growth likely slowed from a blistering 7.5% in the first half of 2013, it won’t have slowed by much and will still show the economy growing above potential, says a commentary from Moody's Analytics.
Moody's expects the country's third quarter GDP to grow by 7%.
The high-frequency data from the Philippines have all been positive since midyear. Industrial production continues to surge ahead, and manufacturing and construction are guaranteed to contribute solidly to growth.
"A lot of the construction in the Philippines is being driven by the government, and a large portion of third quarter growth can be attributed to the public sector," says Glenn Levine is a senior economist in the Sydney office of Moody’s Analytics.
The government has various schemes under way, including direct investment projects as well as public-private infrastructure partnerships in roads, utilities, railways and the like. The government’s rollout of these infrastructure projects has been proceeding at a steady pace, but spending on these projects can be lumpy and construction will likely slow from its 20% surge in the June quarter.
The other side of the construction coin is linked to the real estate market. Data on property prices are difficult to find, but there are reports that condominium prices have recently increased and doubled since 2004. This is driving greater residential construction in metro areas, while continued growth in offshore remittances supports construction and consumer demand across the archipelago.
Levine notes the third quarter figures will have no information on the economic impact of the recent typhoon. However, they will confirm that the economy is in solid shape, with broad-based growth and rising potential.
The analyst also noted that the government has its finances in order and with the economy and tax revenues growing strongly, it can reasonably afford the typhoon's large repair bill.
"Looking past the recent tragedy, there is a lot to like about the medium- and long-term outlook of the Philippines' economy. The government is on a steady path of reform and is encouraging investment. Investors are likely to stay put, preferring to focus on the longer-term fundamentals of one of Asia’s recent success stories," says Levine.