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Philippine Growth Dips Below 6% as Storm Impact Lingers: Economy

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Philippine Economy
Street vendors wait for customers on an overpass as traffic stands congested in Manila, the Philippines. Photographer: Jes Aznar/Bloomberg

May 29 (Bloomberg) -- Philippine economic growth eased to below 6 percent for the first time in nine quarters, giving the central bank scope to keep interest rates at a record low. Stocks and the peso fell.

Gross domestic product increased 5.7 percent in the three months through March from a year earlier, the Philippine Statistics Authority said in Manila today, after a 6.3 percent gain in the previous quarter. The median estimate of 22 economists was 6.4 percent.

Emerging-market economies face a new wave of volatility including monetary policies of the U.S. and Europe, and uneven growth in Japan and China, Philippine central bank Governor Amando Tetangco said this month. The fallout of natural disasters including November’s Super Typhoon Haiyan weighed on growth last quarter, and the pace will pick up, Economic Planning Secretary Arsenio Balisacan said today.

“This will probably be one of the weakest quarters this year,” said Philip McNicholas, a senior economist at BNP Paribas SA in Hong Kong. “The acceleration of the investment cycle as the Aquino administration moves to deal with the infrastructure deficit should boost growth later this year,” he said, adding that the central bank will probably hold borrowing costs for the rest of the year.

The benchmark stock index fell 1.6 percent to its lowest close in four weeks. The peso slid 0.1 percent to 43.92 against the U.S. dollar.

Growth Target

Bangko Sentral ng Pilipinas has increased banks’ reserve requirement ratio twice this year to curb liquidity while keeping its benchmark rate unchanged at 3.5 percent since October 2012.

The central bank will continue to watch global and domestic developments, refine monetary policy settings and deploy macroprudential rules as appropriate, Tetangco said today.

Money supply growth has exceeded 30 percent for nine straight months through March. Inflation quickened to 4.1 percent in April from 3.9 percent the previous month.

Haiyan killed more than 6,000 people and damaged crops in central Philippines. While drier weather from El Nino is a risk to growth, the government is confident of meeting its target of 6.5 percent to 7.5 percent this year, Balisacan said today.

The main cause for weaker growth last quarter was agriculture, Finance Secretary Cesar Purisima said in a Bloomberg TV interview with Zeb Eckert today. Agriculture expanded 0.9 percent from a year earlier, matching the pace in the previous quarter.

Increase Spending

President Benigno Aquino plans to increase spending to a record this year and lure more than $22 billion of investments in highways and ports to improve infrastructure and create jobs. A venture of Ayala Corp. and Metro Pacific Investments Corp. yesterday bid for a 64.9 billion-peso ($1.5 billion) project to extend a Manila rail network, while San Miguel Corp. has submitted a $10 billion proposal for an airport in the capital.

Standard & Poor’s this month lifted the nation’s credit rating one level to BBB, a year after raising it to investment grade. The Philippines also won investment-grade scores from Moody’s Investors Service and Fitch Ratings last year.

Earlier this month, Indonesia reported GDP grew 5.21 percent last quarter from a year earlier, while Malaysia’s economy expanded a faster-than-estimated 6.2 percent.

Philippine GDP grew 1.2 percent from the previous quarter, today’s report showed, while consumer spending increased 5.8 percent from a year earlier. Manufacturing growth eased to 6.8 percent from a 12 percent gain in the previous three months.

Manufacturers may have cut back on production in anticipation of a slowdown in consumer demand in Japan ahead of a consumption-tax increase, and because of a truck ban in Manila, Michael Wan, a Singapore-based economist at Credit Suisse Group AG, said in a note. The rush-hour ban on trucks was implemented in February to ease the city’s traffic gridlock.

The government is creating fiscal space as it fast-tracks infrastructure spending, Purisima said. Rising household consumption shows the economy’s resilience, he said.

To contact the reporters on this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net; Cecilia Yap in Manila at cyap19@bloomberg.net

To contact the editors responsible for this story: Stephanie Phang at sphang@bloomberg.net Rina Chandran, Malcolm Scott

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