Economic data

Philippine Q3 economic growth slower than expected but still one of fastest growing in Asia

PUBLISHED : Thursday, 26 November, 2015, 3:44pm
UPDATED : Thursday, 26 November, 2015, 3:43pm

The Philippine economy grew slightly slower-than-expected in the third quarter of 2015 but remains on track to be one of Asia's fastest growing economies this year with domestic consumption and the country's services sector staying strong.

The gross domestic product data released Thursday supports views the central bank will keep its interest rates policy unchanged for now as growth holds up in the face of slowing global demand.

The economy grew 1.1 per cent from the second quarter, below the 1.5 per cent forecast in a Reuters poll, and slower than the June quarter's 2.0 per cent.

From a year earlier, third quarter growth was 6.0 per cent, picking up from an upwardly revised growth of 5.8 per cent in the second quarter but weaker than a forecast 6.3 per cent.

“This growth trajectory we are seeing will likely continue in the fourth quarter as we expect domestic demand to still pick up during the holiday season,” Economic Planning Secretary Arsenio Balisacan said in a media briefing, adding low inflation and the impact of election spending should support growth.

Strong domestic demand, underpinned by monthly remittances worth around US$2 billion from overseas workers, and benign inflation, have kept Southeast Asia's fifth largest economy relatively resilient to sputtering global demand.

That has allowed the Bangko Sentral ng Pilipinas (BSP) to keep its key policy rate steady at a near 1-1/2-year low of 4.0 per cent, where it has been since September 2014.

“They will probably retain a neutral stance in the December meeting, but we might see a less hawkish rhetoric from the BSP from hereon until probably we see the fourth quarter (GDP) print,” said Emilio Neri, chief economist at the Bank of the Philippine Islands.

Balisacan said risks to growth remain, particularly from a protracted El Nino weather pattern, and political uncertainty ahead of the country's national election in May as investors hold expansion plans until after a new government is formed.

But Balisacan said average growth this year is still likely to come in within the 6 to 6.5 per cent government estimate. If such expectations are met, growth would be higher than market forecasts of 5.7 per cent and just behind the growth projections of Asian economic powerhouses China and India.

“The medium-term outlook is obviously dependent on the choice and performance of the next president. However, it would take a spell of very bad governance to undo the progress made under (President Benigno) Aquino, and we expect the economy to continue growing strongly,” said Daniel Martin, senior Asia economist at Capital Economics.

Main growth drivers in the third quarter were services, which climbed an annual 7.3 per cent driven by transport, communication and real estate, and a 17.4 per cent jump in government spending in the period against a year-ago decline of 2.5 per cent.

The Philippine peso slightly weakened to 47.06 per dollar after the GDP data against Wednesday's close at 46.97, while the stock market was flat.