PHL economy grows 5.9% in third quarter, beats forecast

The Philippine economy grew 5.9% in the third quarter from a year earlier, the statistics agency said on Thursday, stronger than the previous quarter’s 4.3% expansion.

Analysts polled by Reuters had expected third quarter output to grow 4.7%.

On a quarter-on-quarter basis, gross domestic product expanded 3.3%, beating the 2.0% forecast in the same Reuters poll.

The main contributors to third quarter expansion were growth in wholesale and retail trade, repair of motor vehicles and motorcycles, financial and insurance activities, and construction, the Philippine Statistics Authority said.

The country’s has a 6%-7% GDP growth target for the year.

Like many countries, the Philippines has been grappling with soaring inflation that has dampened demand and has forced the central bank to aggressively raise interest rates at the expense of growth.

But the economic planning secretary, Arsenio M. Balisacan, was optimistic about the growth outlook, saying a 6%-7% growth target set by the government was “still doable” and “within reach.”

To reach the lower end of the goal, Mr. Balisacan said the economy would have to grow 7.2% in the last quarter, which he said was not impossible as long as the government sustained robust spending and inflation stays on a downtrend trend.

Mr. Balisacan said inflation remained a challenge as it dampened household consumption, which grew at a slower pace of 5.0% in the July to September period, the weakest in two years, from 5.5% in the second quarter.

But government spending in the third quarter grew 6.7%, reversing the previous quarter’s annual decline of 0.7%.

Following the Philippines’ faster-than-expected growth in the third quarter, Capital Economics revised its full-year growth forecast this year to 5.0% from 4.0% previously, but it did not share Mr. Baliscan’s optimism.

“With the drag from higher interest rates yet to filter through the economy in its entirety and global demand likely to weaken, we expect below trend and below consensus growth in the coming quarters,” Capital Economics said in a note.

Annual inflation slowed for the first time in three months in October, to 4.9% from 6.1% the previous month, but with risks to the inflation outlook on the upside, the central bank has said it is ready to take further policy action to tame prices.

The central bank, which on Oct. 26 delivered an off-cycle 25 basis point interest rate increase, will meet on Nov. 16 to review policy.–Reuters