Philippines: Economy Notches up Another Blistering Performance


Philippine’s economy looks on track to surpass the government’s official growth target of 6.0-7.0% for this year after real GDP exceeded expectations to come in at 7.5% (y-o-y) in second quarter. This compares with a revised growth rate of 7.7% in the January-March period and marks the fourth straight quarter that the expansion has exceeded 7.0%. The Philippines is the fast growing economy among the South East Asian nations and the Q2 growth rate matches the pace set by China in the same period. For the first six months of this year, real GDP growth averaged 7.6%, well above the 6.4% gain posted in the corresponding period of 2012. Like the first quarter, Q2 growth was boosted by public and consumer spending and this was illustrated by government final consumption rising by a hefty 17.0% (y-o-y), while household final consumption grew by a more modest 6.2%. By output breakdown, both industry and services reported robust gains. However, in seasonally adjusted quarter-on-quarter terms, the second quarter expansion of 1.4% was well below the upwardly revised 2.3% gain posted in the March quarter. Furthermore, the economy has not been immune to the global downturn given that the trade sector has been hurt by sluggish external demand, while the prospect of US monetary easing coming to an end has contributed to an outflow of funds and pushed the peso down by almost 8.0% this year. Other downside risks facing the economy include the prospect of slower government spending following mid-year elections.

Still, real GDP growth expectations for 2013 have continued to improve. With inflation remaining manageable, this should allow interest rates to stay at record-low levels, which is supportive of growth.

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