Philippines Defies Asia Slowdown With Best Growth Since 2010Cecilia Yap and Karl Lester M. Yap
Philippine growth unexpectedly accelerated to the fastest pace in almost three years, defying a regional slowdown as President Benigno Aquino boosted investment and state spending. The peso reversed its decline.
Gross domestic product rose 7.8 percent in the three months through March from a year earlier, compared with a revised 7.1 percent gain in the previous quarter, the National Statistical Coordination Board said in Manila today. The figure beat all estimates in a Bloomberg News survey of 22 economists, whose median was 6 percent.
The peso rebounded from an 11-month low after the data showed Philippine resilience to a cooling in Asian economies that prompted central banks in India, Vietnam and Thailand to cut interest rates this month. Aquino, who won control of Congress in May elections, has cracked down on corruption, narrowed the budget deficit, and procured the first investment-grade rankings from Fitch Ratings and Standard & Poor’s.
“It’s showing domestic demand in the Philippines is very resilient in the face of slowing growth regionally,” said Trinh Nguyen, Hong Kong-based economist at HSBC Holdings Plc. “Government spending surprised on the upside, raising optimism that investment in the country is picking up.”
The peso closed 0.2 percent higher at 42.325 per dollar, according to prices from Tullett Prebon Plc. The Philippine Stock Exchange Index fell 3.8 percent on concern valuations are excessive after surging to a record earlier this month.
Philippine growth in the last quarter was the fastest among 11 Asian economies that have reported data, outpacing China for the first time since at least the first three months of 1994, according to Bloomberg data. The Southeast Asian nation’s full-year expansion last exceeded China’s in 1989, IMF data showed.
Aquino has raised levies on tobacco and liquor, pursued tax evaders and is seeking more than $17 billion in infrastructure investments to increase revenues and create jobs. Companies including San Miguel Corp., Ayala Corp. and JG Summit Holdings Inc. are bidding for the nation’s airport and railway projects.
The economy grew 2.2 percent in the three months through March from the previous period. Investment surged 47.7 percent from a year earlier, compared with a 9.5 percent gain in the previous period. Household consumption increased 5.1 percent and government spending rose 13.2 percent, today’s report showed.
The nation is moving at a “new growth trajectory” and the government is committed to ensure stability as it sees the risk of attracting “too much flows,” Economic Planning Secretary Arsenio Balisacan said at a briefing today.
Bangko Sentral ng Pilipinas, which has held borrowing costs at a record-low 3.5 percent for four meetings, has cut the rate on its special deposit accounts three times this year to 2 percent as it stepped up efforts to curb capital inflows.
Inflation isn’t likely to pick up soon, Balisacan said. Consumer-price gains eased to a 13-month low in April, rising 2.6 percent from a year earlier.
“We have ample policy space to address any immediate price pressures that may arise,” BSP Governor Amando Tetangco said today. The central bank doesn’t see inflation breaching the target of 3 percent to 5 percent over its policy horizon of two years, given recent levels and projections, he said.
The government is sticking to its growth target of 6 percent to 7 percent this year, even as weakening exports are likely to persist, Balisacan said. Overseas shipments, which make up the equivalent of about 30 percent of the economy, fell 7 percent last quarter from a year earlier, data showed.