- Economy grew 7% YoY in second quarter, fastest pace in 3 years
- Top official says government eyes 7-8% growth in medium term
The Philippines economy grew faster than economists predicted last quarter, giving a boost to new President Rodrigo Duterte as he seeks to attract more investment and speed up infrastructure spending.
Gross domestic product increased 7 percent in the three months through June from a year earlier, the fastest pace since the same period in 2013, the Philippine Statistics Authority said Thursday. That was higher than the median estimate of 6.6 percent in a Bloomberg survey of 21 economists and beat the first quarter’s 6.8 percent expansion.
Duterte, a former mayor who took office in June, is seeking to relax business restrictions and cut taxes in a bid to attract more foreign investment and build on the economic success of his predecessor. His administration sees a steady acceleration in growth to 7 percent to 8 percent in the medium term, Socioeconomic Planning Secretary Ernesto Pernia said at a briefing after the GDP release.
The government’s growth outlook is “certainly not outlandish,” Vishnu Varathan, a Singapore-based economist with Mizuho Bank Ltd, said by e-mail. “They do have good demographic dividends to exploit. And if the infrastructure catchup maintains while manufacturing investments follow, this is feasible.”
The Philippines Stock Exchange Index reversed an earlier decline to advance as much as 0.6 percent after the data was released. The index was little changed at 7,948.77 as of 12:52 p.m. in Manila.
Pernia said the economy may slow down for the rest of this year as first-half growth was boosted by a surge in government spending ahead of the May general election. Second-half GDP growth just above 5 percent would be enough to meet the government’s target of 6 percent to 7 percent expansion this year, Finance Secretary Carlos Dominguez said in an interview on Bloomberg TV.
The services industry, the largest in the economy, expanded 8.4 percent in the second quarter from a year earlier, while industrial output rose 6.9 percent and agriculture fell 2.1 percent. Consumer spending climbed 7.3 percent and government expenditure surged 13.5 percent.
Lifting the investment rate further may be the key challenge for the Philippines, said Timothy Condon, a Singapore-based economist with ING Bank. The rate was at 25 percent of GDP in the first quarter and an increase to 40 percent would be needed to set up the economy for sustained growth of about 7 percent, he said.
“I’m very heartened by the acceleration in investment growth since 2015,” Condon said by e-mail. “This is all about the locals seeing it worthwhile to invest in their economy.”