Bloomberg News

Philippines 7.1% Growth Surprise May Herald End of Rate Cuts

November 27, 2012

Philippine Economy Grew Faster Than Estimated in Third Quarter

Pedestrians walk past a billboard outside a shopping mall in central Manila, the Philippines. Photographer: Julian Abram Wainwright/Bloomberg

Philippine growth unexpectedly accelerated last quarter to the fastest pace since 2010 as government spending and investment increased, easing pressure on the central bank to cut interest rates further. Stocks rose.

Gross domestic product increased 7.1 percent in the three months through September from a year earlier, compared with a 6 percent gain in the previous quarter, the National Statistical Coordination Board said in Manila today. The pace exceeded all 22 estimates in a Bloomberg survey, whose median was 5.4 percent.

President Benigno Aquino is increasing spending to a record this year while seeking more than $17 billion of investment in roads and airports. The Southeast Asian nation is forecast to be among the 10 fastest growing economies in 2012, according to a Bloomberg survey, making it less likely that Bangko Sentral ng Pilipinas will cut its benchmark interest rate again in December.

“The Philippines is going to rock,” said Trinh Nguyen, a Hong Kong-based economist at HSBC Holdings Plc. “The central bank and the government have made timely policy adjustments that are boosting trend growth. With momentum so strong, we think BSP will hold rates and mark the end of the easing cycle.”

The Philippine Stock Exchange Index (PCOMP) erased earlier losses and rose 0.7 percent as of 11:44 a.m. in Manila trading. The Philippine peso was little changed at 40.86 per dollar. It has risen more than 7 percent this year, the best performer among Asia’s 11 most-traded currencies tracked by Bloomberg.

Preserving Firepower

Some Asian officials have restrained their stimulus efforts as global expansion slowed, with others refraining from interest-rate cuts to preserve firepower should Europe’s debt crisis worsen. Thailand may hold borrowing costs today, economists said, after a manufacturing production index rose in October for the first time in five months. Meanwhile, India may report on Nov. 30 that GDP rose 5.3 percent last quarter.

Bangko Sentral “will be careful to calibrate the use of its enhanced policy tool kit to help ensure” domestic demand price pressures and risks from capital flows are managed, central bank Governor Amando Tetangco said today.

“In the near-term, our policy stance appears to remain appropriate,” he said. Full-year growth may be 6 percent to 7 percent, Economic Planning Secretary Arsenio Balisacan said.

Moody’s Investors Service raised the country’s credit rating to one step below investment grade in October, luring more pledges from companies including Alliance Global Group Inc. and First Gen Corp. The government signed a peace deal with Muslim guerrillas in the mineral-rich south last month, and said it expects about $1 billion of commitments in Mindanao.

Philippine exports rose 22.8 percent in September from a year earlier, as data signaling a recovery in the U.S. and China boosted the outlook for Asian goods. Inflation eased to a four- month low of 3.1 percent in October, while remittances, which make up the equivalent of about 10 percent of GDP, surged to a record $1.8 billion in September.

The Philippine economy expanded 6.5 percent in the January- September period, today’s report showed. Public construction in the third quarter climbed 23.7 percent from a year earlier, while government spending gained 12 percent and household spending advanced 6.2 percent.

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

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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