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Philippines Posts Strongest Two Years of GDP Growth Since 1950s

Market in Manila
A laborer sorts through goods on top of a truck in the market district of Divisoria in Manila. Photographer: Julian Abram Wainwright/Bloomberg

The Philippines last quarter capped its strongest two years of growth since the 1950s, when the U.S. ally enjoyed a post-war reconstruction boom, as it lured foreign investment and put money into infrastructure.

Gross domestic product rose 7.2 percent in 2013, the Philippine Statistics Authority said in Manila today, after gaining 6.8 percent in the previous year. That was the fastest two-year pace since 1954-1955, data compiled by Bloomberg show.

A recovery in advanced economies may help President Benigno Aquino achieve his goal of bolstering growth to as much as 8.5 percent by 2016 as he transforms the country into a manufacturing hub. Rising exports have helped counter the impact of Super Typhoon Haiyan, and the central bank said today it will act if needed to contain inflation expectations.

“The Philippine economy clearly still has strong momentum despite the typhoon,” said Edward Teather, an economist at UBS AG who covers Southeast Asian markets from Singapore. “That sort of strength in the context of an acceleration in developed nations increases the risk of overheating, something policy makers should keep an eye on.”

The peso fell 0.4 percent to 45.35 per dollar as of 11:51 a.m. in Manila, according to Tullett Prebon Plc. The currency this week slumped to its lowest in more than three years. Philippine stocks have dropped more than 10 percent in the past six months, the steepest loss in the Asia-Pacific region after Thailand.

Raise Rates

The economy expanded 6.5 percent last quarter, compared with a 6.9 percent gain in the previous three months, today’s data showed. Bangko Sentral ng Pilipinas will probably raise its benchmark interest rate to 4 percent by the fourth quarter from a record-low 3.5 percent now, according to Bloomberg surveys.

Inflation quickened to 4.1 percent in December, the fastest pace in two years, after Haiyan struck in November. The central bank forecasts 2014 price gains to average 4.5 percent.

The unwinding of U.S. monetary stimulus has spurred volatility in emerging markets, adding to concern of easing expansions in Asia. Singapore’s economy shrank for the first time in five quarters, a report showed this month, while Thailand’s central bank last week cut growth forecasts for 2014.

The central bank “will continue to monitor developments, including any noise from temporary domestic volatility, and act as appropriate to ensure inflation expectations remain well-anchored,” Governor Amando Tetangco said after the report. The next policy meeting is scheduled for Feb. 6.

Investment Grade

Aquino plans to increase spending to a record this year while seeking more than $8 billion of investments in highways and airports to improve infrastructure and create jobs. San Miguel Corp., Ayala Corp. and Megawide Construction Corp. are among companies building schools, power plants and roads. The government estimates reconstruction of the typhoon-affected areas will cost 361 billion pesos ($8 billion).

The Philippines won its first investment-grade scores from Moody’s Investors Service, Fitch Ratings and Standard and Poor’s last year. Aquino’s pledge to curb corruption and spur faster growth has seen foreign direct investment almost double to $2.8 billion in 2012 from 2008, World Bank data show.

Consumer spending rose 5.6 percent last quarter from a year earlier, according to today’s report. Investment gained 5.7 percent, while manufacturing increased 12.3 percent.

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