Fitch Solutions unit BMI lowered its Philippines' growth outlook to 6% from 6.2%, citing the mixed economic performance in the country's gross domestic product (GDP) in the second quarter.
According to the report, despite the 6.3% GDP growth year-on-year, surpassing consensus estimates, the country's growth rate fell short of BMI's projection of 6.5%, raising concerns about the economy's trajectory.
"The Q2 growth figure, though strong at first glance, was largely driven by a favorable base effect from the previous year, when GDP grew by just 4.3%. On a seasonally adjusted basis, the economy expanded by a modest 0.5% quarter-on-quarter, the slowest pace since Q2 2023," BMI said.
Based on the data, BMI adjusted its full-year growth forecast for the Philippines from 6.2% to 6%, citing weaker-than-expected momentum heading into the year's second half. To meet the original target, the economy would need to expand by approximately 6.4 percent in H2—a prospect BMI now views as unlikely.
The latest data reveals a significant drag from the external sector, with net exports subtracting 0.8 percentage points from headline growth due to a slowdown in export contributions and a surge in imports. This weakness is expected to persist amid a slowing global economy.
However, there are positive signs domestically. Investment activity rebounded strongly in Q2, with gross fixed capital formation contributing 2.5 percentage points to growth, its highest level in nearly two years.
BMI anticipates imminent rate cuts by the Bangko Sentral ng Pilipinas could further support domestic demand in the coming quarters.
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