Philippine economic growth remained robust despite the country’s equities and currency markets being hammered in recent months by an emerging markets sell-off. Construction and investments in durable equipment, as well as government spending, countered the effects of a global and regional slowdown.
Gross domestic product grew 7.5 per cent in the second quarter from a year ago after expanding by a revised 7.7 per cent from the previous three months, making it the fourth straight quarter that the economy climbed more than 7 per cent, said the government statistics board. The economic growth figure exceeded analysts’ median forecast of 7.2 per cent growth for the quarter ending June.
“This only confirms that the Philippine economy is on a higher growth trajectory,” said Arsenio Balisacan, the country’s economic planning secretary. “The composition of our growth shows signs of an economy in the process of rebalancing, moving from being largely consumption-driven to becoming investment-led and industrialised.”
Though personal consumption spending still accounts for almost 70 per cent of the economy, it contributed less than half of second-quarter GDP growth. Most of the expansion came from government spending, boosted by the May 2013 midterm polls, and investments, particularly public and private construction.
Construction grew 15.6 per cent in the quarter to June after rising 30.1 per cent in the previous period, buoyed by government infrastructure projects as well as a boom in high-rise residential condominiums, office towers and other types of housing.
“Many people, especially retirees with some money saved, are buying land and building houses for sale to find an alternative outlet for their investments after interest rates have fallen to record lows,” said Manolito Madrasto, executive director of a construction industry association.
The latest GDP numbers show the Philippines remains the “fastest-growing economy among emerging economies in the Asean region”, Mr Balisacan said. The Philippines’ 7.5 per cent second-quarter growth matched that of China but is higher than Indonesia, Vietnam or Malaysia, he added.
For the first half of the year, the economy grew 7.6 per cent from a year ago, placing it on track to exceed the government’s full-year GDP growth target of 6-7 per cent.
This week, the peso dropped to a three-year low after steadily falling 7.7 per cent since the start of the year while share prices fell to an eight-month low, wiping out gains since the start of the year as investment funds flowed out of emerging markets amid expectations of rising interest rates in developed countries.
Delays in the implementation of key infrastructure projects, are also adding to investor worries about the Philippines, said Benjamin Diokno, an economist and former budget secretary. Of about a dozen big-ticket projects announced by the government in late 2010, only three have been awarded so far. “There is a big demand for investments arising from the public-private partnership projects but these are hardly moving,” he said.
But unlike other countries battered by capital outflows, the Philippines’ current account is expected to remain in surplus this year, bolstered by continued growth in remittances from Filipinos working and living abroad as well as higher foreign exchange earnings from call centres and other service exports. Inflation is also expected to remain low.
“We continue to believe growth momentum will sustain for the rest of the year, which, along with [a] still-rising current account surplus, puts the economy in a good position to withstand risks from capital outflows and any associated financial market volatility,” said Euben Paracuelles, regional economist at Nomura in Singapore.
Source: Roel Landingin, Financial Times, August 29, 2013
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