Philippine Growth Misses Estimate, Target Likely to Be Cut

  • Even low end of 2015 growth target is a challenge: Balisacan
  • Central bank governor sees no change in policy stance

Philippine economic growth missed analysts’ estimates last quarter even as state spending increased, with a government official saying the expansion target for this year will likely be cut.

Gross domestic product increased 5.6 percent in the three months through June from a year earlier, the Philippine Statistics Authority said in Manila Thursday. That compares with a median estimate of 5.7 percent in a Bloomberg survey, and a 5 percent pace in the first quarter.

External risks make meeting this year’s growth target of at least 7 percent "very much a challenge," Economic Planning Secretary Arsenio Balisacan said today. Still, a consumption-based economy and steady dollar inflows insulate the country more than other emerging nations from the yuan’s devaluation and U.S. interest-rate increases, Jay Peiris, the International Monetary Fund’s representative in Manila, said last week.

“The downside risk is still evident and volatility in the financial markets is not helping,” said Jeff Ng, a Singapore-based economist at Standard Chartered Plc. “However, the good part for the Philippines is that growth remains pretty much domestic-led and we shall continue to see this solid domestic growth going forward.”

The benchmark stock index gained 2.2 percent at the close, and the peso climbed 0.1 percent to 46.68 against the U.S. dollar. While the rout in emerging-market stocks and currencies has dragged the peso to a five-year low, it has still weakened less than other Southeast Asian currencies.

Forecasts Cut

Government spending climbed 3.9 percent in the second quarter from a year earlier, and consumer spending gained 6.2 percent. That helped counter weakening exports, which fell every month in the second quarter.

Barclays Plc today cut their Philippine GDP growth forecast for this year by 1 percentage point to 5.5 percent, saying they still expect the Philippines to outperform other Southeast Asian economies. Capital Economics Ltd. lowered their estimate to 5.7 percent from 6 percent.

President Benigno Aquino, whose term ends in June 2016, had targeted growth of 7 percent to 8 percent this year and next. Bangko Sentral ng Pilipinas kept the benchmark rate unchanged this month, and Governor Amando Tetangco said this week that while private consumption will continue to be well supported, it is necessary to find other drivers of growth.

“We can expect economic performance that is still strong, albeit more modest than the government’s full-year target,” Tetangco said today in a mobile-phone message. “With this out turn, there may be no need for any immediate recalibration of monetary policy settings.”

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