The Philippine economy expanded at a stronger-than-expected pace of 5.9% y/y in 3Q23 (from +4.3% in 2Q23), which was well above our estimate (+4.5%) and Bloomberg consensus (+4.7%). It was primarily driven by higher government spending, investments and a persistent positive net trade contribution, which offset softening household consumption and stock withdrawals. All major economic sectors pencilled in a bigger gain with the services sector remaining the key growth driver, followed by construction, utilities and manufacturing sectors.     

Taking the latest upbeat GDP growth reading and year-end festive demand into consideration, we raise our 2023 full-year real GDP growth forecast to 5.7% (from 5.0% previously, official est: 6.0%-7.0%). We also upgrade the country’s growth outlook for next year to 6.5% (from 6.0% previously, official est: 6.5%8.0%), mainly backed by the passage of a larger national budget for 2024 (on 27 Sep), softer inflationary pressures with less restrictive monetary policy stance, as well as an expected upturn in global tech cycle.