Q2 Surprises On The Downside, USD/PHP Threatening Break Higher

Philippines Q2 GDP growth came in well below expectations. The q/q outcome was -0.9%, versus +0.6% forecast. Q1 growth was revised down a touch to 1.0% from 1.1%. The y/y pace also fell well short, printing at +4.3%, versus 6.0% forecast and the 6.4% pace in Q1.

• Some of the detail filtering out shows a sharp pull back in government spending, -7.1% y/y. Consumer spending was 5.5% y/y, but this is a moderation of the Q1 6.4% pace. Investment spending was close to flat in y/y terms, after +12.6% in Q1). Other sectors showed services growth at 6%y/y and IP +2.1% y/y.
• Philippine officials have come out and stated that the 2023 growth target is still attainable, but H2 growth must be at 6.6%, versus 5.3% in H1. This is according to the Secretary of Socioeconomic Planning Baliscan. He also stated that easing CPI trends bodes well for lower interest rates.
• USD/PHP has opened around recent highs in the 56.40/45 region (+0.40 firmer versus yesterday's closing levels), but hasn't seen further PHP losses at this stage. This is right around YTD highs in the pair. A break above this level would open up a move towards 56.90, highs last seen in November last year.