Philippine Economy Grew 4.9% in First Quarter
Philippine Growth Slows to 4.9% as Inflation Damps Spending
Ted Aljibe/AFP/Getty Images
Inflation in the Philippines accelerated to a 12-month high in April, prompting the central bank to increase its benchmark interest rate for a second time this year to 4.5 percent.
Inflation in the Philippines accelerated to a 12-month high in April, prompting the central bank to increase its benchmark interest rate for a second time this year to 4.5 percent. Photographer: Ted Aljibe/AFP/Getty Images
May 25 (Bloomberg) -- Philippine Trade Secretary Gregory Domingo talks about the country's trade outlook after the nation posted a trade deficit for March. Domingo speaks from Manila with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)
The Philippine economy expanded at the slowest pace since 2009 last quarter as exports eased and government spending faltered.
Gross domestic product increased 4.9 percent from a year earlier based on 2000 prices, compared with a 6.1 percent gain in the three months through December, the National Statistical Coordination Board said in Manila today. The median estimate of 13 economists surveyed by Bloomberg News was for growth to slow to 5.1 percent, using 1985 as the base year.
Expansion is cooling in Asian nations including Malaysia and South Korea as a slowing recovery in the U.S. and a recession in Japan cut demand for exports such as Philippine- made Texas Instruments Inc. (TXN) semiconductors. Growth will likely quicken this quarter as the government catches up on spending, Economic Planning Secretary Cayetano Paderanga said today.
“The fundamentals for strong domestic-led expansion are still in place,” said Vincent Conti, a Singapore-based analyst at Australia & New Zealand Banking Group Ltd. “Though declines in government spending will have some negative effects on growth, these will be more than made up for by the boost in investor confidence brought about by fiscal consolidation.”
The Philippines reported a budget surplus in April as revenue rose, aiding President Benigno Aquino’s efforts to narrow the budget deficit from a record 314 billion pesos in 2010. Moody’s Investors Service may raise the country’s credit rating “sooner rather than later,” Assistant Vice President Christian de Guzman said last month after the government kept its first-quarter budget shortfall below target.
Stocks Climb
Benchmark three-year bond yields fell to a two-week low today. The peso rose for a third day after sliding to an eight- week low last week. The Philippine Stock Exchange Index rose 0.5 percent today and has climbed more than 2 percent this year.
“We are prepared for any uncertainty or economic downturn,” Banco de Oro Unibank Inc. (BDO) President Nestor Tan said in a briefing last week, citing tension in the Middle East and the Japan earthquake. Loan growth will probably be moderate as remittances sent home by Filipinos overseas ease, he said.
Under-spending by the government and the slowdown in global trade “constricted” the economy in the first quarter, National Statistical Coordination Board Secretary General Romulo Virola said in Manila today. The government will review its goal to expand the economy by 7 percent to 8 percent this year, Paderanga said.
Inflation Pressure
Inflation in the Philippines accelerated to a 12-month high in April, prompting the central bank to increase its benchmark interest rate for a second time this year to 4.5 percent on May 5. Bangko Sentral ng Pilipinas is prepared to take additional action if necessary to meet the inflation target of 3 percent to 5 percent for this year, Governor Amando Tetangco said last week.
A further increase in rates may damp economic expansion, Virola said today. Still, the government will “pump prime” the economy starting this quarter and growth will improve in the remainder of the year as power and infrastructure investments come in, President Aquino said today.
Aquino will speak to investors in Brunei this week, his eighth overseas trip since he took office in June, as he seeks funds to build more than 700 billion pesos ($16 billion) of roads, airports, and schools to boost the economy. Aquino aims to expand the economy by as much as 8 percent annually from 2011 to boost incomes in a nation where the World Bank estimates one out of four people live on less than $1.25 a day.
Exports Falter
Asia’s growth still outpaces the rest of the world, as sovereign credit woes in Europe deepen while Japan’s economy shrank last quarter after the March 11 earthquake and tsunami disrupted production, sending the nation to its third recession in a decade.
Philippine export growth slowed to a 17-month low in March, with shipments abroad rising 4.1 percent from a year earlier. Overseas sales account for about 30 percent of the $161 billion economy.
Remittances from the more than 8 million Filipinos living in countries including the U.S. and Saudi Arabia gained 5.9 percent in the first three months of the year to $4.6 billion. Government expenditure fell 11.6 percent in the first four months of the year, a report showed last week, undermining Aquino’s goal to increase spending to a record in 2011.
To contact the reporters on this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net; Cecilia Yap at cyap19@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
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