Nov. 29 (Bloomberg) -- The Philippine peso rose for a second day on speculation remittances from overseas will increase and the government will step up spending to compensate for waning exports.
The currency advanced after a report yesterday showing third-quarter growth slowed highlighted the need for President Benigno Aquino’s $1.7 billion stimulus program unveiled last month. Remittances from citizens working abroad are supporting domestic consumption, according to HSBC Holdings Plc and Standard Chartered Plc.
“Remittances have been providing solid support to domestic consumption and we see them holding up well this quarter,” said Betty Rui Wang, an economist in Hong Kong at Standard Chartered. “There will be some impact to growth from government spending in the fourth quarter but we cannot say if it will be significant yet.”
The peso strengthened 0.2 percent to 43.695 per dollar as of 10:20 a.m. in Manila, according to Tullett Prebon Plc, paring this month’s loss to 2.5 percent. Financial markets are closed tomorrow for a holiday.
Remittances climbed 8.4 percent in September to $1.74 billion from a year earlier, the central bank said on Nov. 15. They have increased 7.2 percent a month on average this year, according to data compiled by Bloomberg. Wang expects they will rise by at least 6 percent this quarter from a year earlier.
“The one bright spot for the Philippines, domestic demand, continued to support growth in the third quarter,” HSBC economist Trinh Nguyen wrote in a research report yesterday. “This reflects robust remittance inflows, which are expected to increase in the coming months due to the Christmas season.”
The Philippine economy grew 3.2 percent in the three months through September, versus 3.1 percent in the prior quarter, the government said yesterday. The median forecast in a Bloomberg News survey was for a 4.1 percent expansion.
The central bank will hold its overnight borrowing rate at 4.50 percent when it meets on Dec. 1, according to 12 of 14 economists in a Bloomberg survey. Two expect a cut to 4.25 percent. Monetary easing is “not imperative” as rates remain low, Deputy Governor Diwa Guinigundo said yesterday.
The yield on the government’s 8 percent bonds due July 2031 dropped seven basis points, or 0.07 percentage point, to 6.72 percent, according to Tradition Financial Services. The rate has declined 16 basis points in six straight days.
--With assistance from Max Estayo in Manila. Editors: Simon Harvey, Ven Ram
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