The Philippines’ economy has shown remarkable resilience in the past two years in spite of the slow pace of the global recovery. Last year real GDP growth registered a robust 6.8% as activity elsewhere in the region was hampered by sluggish global demand, and in first half of this year the economy accelerated further, averaging 7.6%. Growth has been boosted by robust consumption and strong investment. The strength of the former is mainly supported by buoyant remittance inflows. Latest data show that overseas Filipino workers sent home US$1.198bn in August, a rise of 6.8% from a year earlier. The August figure is the second highest level so far this year and analysts believe remittances will remain strong through the remainder of 2013, with inflows expected to pick up sharply during the December holiday season. The government is targeting growth in the range of 6.0-7.0% for 2013 and so far the economy’s first half performance has already exceeded the upper limit of this target range. Despite the devastation inflicted to large parts of the country by typhoon Haiyan, the consensus believes that growth for this year will still hit the official 7.0% ceiling. Going in to 2014, growth expectations have picked up to 6.3% this month. This probably reflects higher infrastructure spending as the reconstruction effort gets into full swing.
On the inflation front, consumer price rises picked up in October, rising by 2.9% (y-o-y) compared to 2.7% a month earlier. The latest figure is the highest reading in seven months but remains well within the central bank’s 3.0-5.0% 2013 target range. Consequently, there is little urgency for interest rates to head upwards and accommodative monetary conditions are expected to remain in place to support the economy for the time being.
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