Moody's unit: Growth in Q2 slowed at 4.2%

By Jun Vallecera, BusinessMirror

Posted at Aug 28 2012 07:37 AM | Updated as of Aug 28 2012 07:29 PM

MANILA, Philippines - A research unit at Moody’s Investor Service, the global credit watcher looking to upgrade the country’s credit standing upon proof of sustained growth down the line, anticipates growth averaging only 4.2 percent in the second quarter.

But the Singaporean bank DBS said the Philippine economy likely grew 5.6 percent in the second quarter of 2012.

According to Moody’s Analytics, Philippine growth measured as its gross domestic product (GDP) likely slowed in the second quarter as consumption and manufacturing activities weakened during a period when the global business sentiment ebbed.

“The Philippines likely grew 4.2 percent year-on-year in the second quarter, mildly weaker than the first quarter’s 6.4 percent. Imports strengthened, reflecting resilience in domestic demand despite global headwinds,” the Moody’s unit whose research findings are independent of its parent’s views said.

Moody’s is headquartered in New York while the Moody’s Analytics report came out of its Sydney offices in Australia.

Its findings approximate the views expressed earlier by local economists and experts predicting continued expansion for the economy in the second but at a pace slower than actual growth of 6.4 percent in the first three months.

“The services sector continued its steady and resilient expansion, and government spending remained strong,” the Moody’s unit said.

Its analysts said parallel studies on countries in the region such as India, for example, show that country’s growth rate slowing further to 5.2 percent.

“In contrast, the Philippines likely grew 1.3 percent quarter-on-quarter in the June quarter. Domestic demand has proved resilient to global headwinds. Government spending also provided a lift,” the Moody’s unit said.

Also according to its analysts, the country’s services sector continued its steady and resilient expansion and government spending remained strong.

They, however, cautioned that there remained weak points in the economy.

“Manufacturing was volatile, and private consumption likely softened as remittances from Filipinos working abroad have lost some steam. The Philippines is on track to grow 4.7 percent in 2012,” the analysts said.

Philippine officials still look forward to growth averaging 5 percent to 6 percent in GDP terms this year.

Bank executives like Aurelio R. Montinola, president and chief executive officer at the Bank of the Philippine Islands, were optimistic of continued growth in the second quarter based on lending activities of most banks.

According to Montinola, the Philippines was seen to show proof on “how strong the economy was in the second quarter.”

His optimism was based on continued bank lending growth during the period and that household and business sector borrowers, no matter the weak global demand, are able to access bank funds as and when required.

“Bank lending growth is significantly higher. In the first half I think most companies have done well,” Montinola said of first half earnings of companies averaging higher and in double-digits.

Meanwhile, Sen. Edgardo Angara prodded the government to fast-track implementation of various infrastructure projects using some P170 billion in carryover funds from last year’s budget to cushion the impact of a projected second quarter slowdown.

But Angara suggested that the multibillion-peso projects should be bidded out to several contractors in the regions, instead of the centralized bidding process where huge projects spanning diiferent provinces are awarded to one or only two winning bidders.

Saying there were available funds for a number of pending big-ticket allocations, Angara noted that one such classroom contract was already worth P26 billion.