Philippine Economic Growth Misses Estimates
The Philippine economy grew less than economists estimated, adding pressure on policy makers to use monetary and fiscal measures to support expansion as the global recovery falters.
Gross domestic product increased 3.2 percent in the third quarter from a year earlier, compared with a revised 3.1 percent gain in the three months through June, the National Statistical Coordination Board said in Manila today. The median of 14 estimates in Bloomberg News survey was for a 4.1 percent expansion.
President Benigno Aquino unveiled a 72 billion-peso ($1.6 billion) fiscal stimulus package in October, joining neighbors including Malaysia and Indonesia in seeking to protect growth as Europe’s debt woes and a struggling U.S. economy increase the risk of another global recession. Bangko Sentral ng Pilipinas will probably keep its benchmark interest rate unchanged this week even with an inflation rate that is at the highest level in 2011, economists surveyed by Bloomberg News predict.
“Growth is fast becoming the bigger risk than inflation” for Asian economies such as the Philippines, Edward Teather, a Singapore-based economist at UBS AG, said before the report. “With Europe facing a recession and food prices coming down, Asian central banks including the BSP will start cutting interest rates next year.”
The peso has fallen more than 2 percent this month, declining along with Asian currencies as Europe’s worsening crisis roils global financial markets and prompts investors to shun emerging-market assets. The Philippine Stock Exchange Index (PCOMP) fell 6.8 percent last quarter and was little changed today.
Bangko Sentral has scope to boost demand in response to slower global growth, Governor Amando Tetangco said last week, signaling officials may start considering easing at its Dec. 1 monetary policy meeting. The central bank kept the rate it pays lenders for overnight deposits at 4.5 percent at its Oct. 20 meeting.
“The balance of risks to future inflation continues to be tilted slightly to the downside,” Tetangco said. That gives the central bank “some room for policy maneuver to address possible demand shocks from global developments,” he said.
The World Bank forecast growth in Asia will slow next year and said governments should focus on boosting economies by increasing spending. Thailand’s economy may contract this quarter, the government said last week, while Indonesia’s central bank cut its growth forecast for 2012 this month.
“Policy makers will need to walk a fine line guarding against the short-term risks to growth and the lingering vulnerabilities associated with a still-buoyant, if not overheated, economy,” the World Bank said in a Nov. 22 report. “To mitigate the vulnerabilities of continued low real interest rates, an easing of fiscal policy appears the most appropriate line of defense before the monetary policy stance is eased.”
Philippine exports tumbled the most in 29 months in September, with shipments sliding 27 percent from a year earlier. Overseas sales are equivalent to about 30 percent of the economy.
Easing growth has prompted companies including Philippine Long Distance Telephone Co. to cut profit forecasts for this year as consumers cut back on spending. Ginebra San Miguel Inc. (GSMI), a Philippine distiller, reported a third consecutive loss last quarter after revenue declined.
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