July 23, 2018, 1:44 am
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Q3 growth seen at 6.5%

The economy likely sustained its strong growth momentum in the third quarter, buoyed by brisk consumer and government spending, while higher exports and agricultural output provided a further boost.

The Philippines is among the fastest growing economies in Asia although a weak peso and President Duterte’s deadly war on drugs pose risks to the outlook.

Analysts forecast the country’s gross domestic product expanded a seasonally adjusted 1.6 percent in the July-September period from the second quarter, when it grew 1.7 percent.

On an annual basis, the median forecast from 17 analysts was for growth of 6.5 percent in the third quarter, matching the pace of the second quarter and marking the ninth consecutive quarter of growth above 6 percent.

Only five analysts gave quarter-on-quarter forecasts.

The data will be released on Thursday.

“Despite the continued rise in exports, industrial production is showing signs of fatigue. Thus, we expect sequential growth to have eased,” said Eugenia Fabon Victorino of ANZ Research in Singapore.

The economy’s performance reflects the export-driven growth elsewhere in Asia, which may continue, analysts said.

“The run down in inventories in Q3 will likely provide support to activity in the coming months as Asia continues to benefit from the synchronized global recovery,” Barclays said in a note.

Last week, Socio-economic Planning Secretary Ernesto Pernia said growth in the third and fourth quarters was likely to be faster than 6.5 percent, propped up by government spending, exports and farm output.

Full-year growth should be around the centre of the 6.5 to 7.5 percent target, he said, more upbeat than analysts’ median forecast of 6.5 percent.

“Speeding up the pace of reforms should help the country reach the upper-bounds of the target,” said Noelan Arbis of HSBC in Hong Kong, referring to the pending tax reform legislation and the infrastructure overhaul.

Duterte has pledged to modernize the country’s airports, roads, railways and ports under his $180-billion, six-year “Build, Build, Build” initiative.

The government aims for growth of 7 to 8 percent next year through 2022, when Duterte’s six-year term ends. Investing in infrastructure will have the highest multiplier effect on the economy, Finance Secretary Carlos Dominguez said at a recent business forum.

The Philippines has managed to keep economic growth solid and inflation in check despite a weak peso, allowing the central bank to leave policy settings steady since September 2014. The currency is among Asia’s worst performing, down nearly 3 percent against the US dollar so far this year.

The central bank has signaled it is in no rush to alter policy settings even as it expects inflation to creep higher next year. (Reuters)
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