GDP growth forecasts by private analysts out of range, says DOF

Analysts from 26 private institutions failed to correctly forecast the better-than-expected 7.1-percent year-on-year growth of the gross domestic product in the third quarter, according to the Department of Finance.

The DOF said based on forecasts by economists, Michael Ricafort of Rizal Commercial Banking Corp. and Mitzie Irene Conchada of De La Salle University were closest with their predictions at 6.5 percent for GDP growth in the third quarter.

Emmanuel Lopez of Colegio de San Juan de Letran gave an 8-percent growth forecast, which was off by 0.9 percentage points. “The worst forecast was by [Euben Paracuelles of] Nomura who at 2.9 percent was 4.2-percentage points away,” DOF Undersecretary and chief economist Gil Beltran said in his latest economic bulletin.

Beltran said the revision of the second-quarter GDP growth by the Philippine Statistics Authority to 12 percent placed two forecasters—Jonathan Ravelas of BDO Unibank Inc. and Rajiv Biswas of IHS Markit as having correctly predicted the economic growth rate during the April-June period.

He said the forecasts that for the third quarter were in the median of 4.6 percent.

“The wide range of outlook, reaching as high as 11.7 percentage points in the second quarter and going down to 7.5 points in the third quarter, shows high level of uncertainties. Such uncertainties clouded the outlook by analysts and led many of them to understate their assessment of growth performance. To the extent that many of them also advise investors, their forecasts could have put on hold investment decisions by firms,” Beltran said.

The highest forecast was 10.4 percent by Robert Dan Roces of Security Bank Corp., he said.

John Paolo Rivera of the Asian Institute of Management predicted third-quarter GDP growth at 6 percent, while Alvin Joseph Arogo of the Philippine National Bank and Emilio Neri Jr. of the Bank of the Philippine Islands said the economy grew 5.8 percent and 5.6 percent, respectively, during the same period.

Beltran said Luis Limlingan of Regina Capital gave a 5.5 percent forecast while Suhaimi Bil Ilias of Maybank and Shreya Sodhani of Barclays predicted 5 percent; Jefferson Arapoc of the University of the Philippines Los Baños, 4.8 percent; ANZ Research, 4.7 percent; Moody’s Analytics, 4.6 percent; Ruben Carlo Asuncion of UnionBank of the Philippines, 4.6 percent, Patrick Ella of Sun Life Financial, 4.5 percent; HSBC Global Research, Makoto Tsuchiya of Oxford Economics, and Ravelas of BDO Unibank, Inc., 4.3 percent; Chua Han Teng of Development Bank of Singapore, 4.2 percent; and Bernardo Villegas of the University of Asia & the Pacific (UA&P) and Alex Holmes of Capital Economics, 4 percent.

Those who gave a forecast of below 4 percent were Nicholas Antonio Mapa of ING Bank N.V. Manila Branch, 3.8 percent; Goldman Sachs Economics Research, 3.6 percent; Biswas of IHS Markit and Miguel Chanco of Pantheon Macroeconomics, 3.5 percent, Beltran said.

Beltran said the better management of COVID-19 risks through more directed, granular lockdowns, which allowed the economy to overperform in the second and third quarters, and the arrival of much needed vaccines and their efficient administration “should be able to help in the safe and gradual reopening of the economy and bring back investor confidence.”

He said the country needed to stay alert and not let its guard down to prevent a recurrent of more restrictive quarantines.

The economy’s 7.1-percent expansion in the July-September period is among the highest third-quarter growths in the Association of Southeast Asian Nations and East Asian region.

On a seasonally adjusted quarter-on-quarter basis, the economy expanded by 3.8 percent. This indicates sustained recovery despite two weeks of the Enhanced Community Quarantine and a month of Modified ECQ in the National Capital Region and nearby economic hubs, according to President Duterte’s economic team.

Meanwhile, economists from First Metro Investment Corp. and University of Asia and the Pacific expect full-year GDP growth to surpass the 4 percent to 5 percent range set by the government as the more relaxed quarantine restrictions would boost consumer and business confidence in the last quarter.

The economists, in their joint report for the November issue of The Market Call, said economic recovery appeared to gain momentum in the third quarter, growing by 7.1 percent, a turnaround from the 11.6-percent decline a year ago.

“With milder quarantine restrictions in Metro Manila+ starting, and headline inflation going below 4 percent by December at the latest, business and consumer sentiment should further boost economic activity to a full-year GDP growth slightly above the 4 percent to 5 percent revised government target,” the report said.

“The unexpectedly good Q3 GDP expansion has added more optimism to firms and consumers. Initially, they had put their hopes on much reduced restrictions in Metro Manila+ and the faster rollout of Covid-19 vaccines, and all these should yield better fruits in the fourth quarter,” they said.

They added that the fourth-quarter growth “would likewise be good as election spending gains traction.”