Re: Philippine News
Philippine Economy Surges
MANILA—The Philippines cemented its spot as one of the most resilient economies in Asia by posting a stronger-than-expected expansion in the third quarter, underscoring a shift toward domestic demand and away from a reliance on exports to keep the economy ticking over.
The Southeast Asian country's economy grew 7.1% in the three months ended September from a year earlier, the fastest rise in nearly two years, the National Statistical Coordination Board said Wednesday. The result handily beat the 5.3% expansion forecast in a Dow Jones Newswires survey and was above the prior quarter's 6.0% increase.
The pickup, which puts Philippine growth just behind that of China and in the top spot for Southeast Asia, helped Manila stocks and the Philippine peso shrug off weakness in other Asian markets Wednesday.
Jose Vistan, research head at AB Capital Securities, said the result reflects the Philippines' transformation into an "inward-looking economy, less dependent on exports and foreign investments."
He said momentum should carry through next year, giving the government room to increase taxes, reduce its debt and eventually win an investment-grade credit rating—something that would further fuel investor confidence.
"We're on our way to surpassing our target," Economic Planning Secretary Arsenio Balisacan said at a news conference, referring to the government's full-year goal of a 5%-6% expansion. He said this year's narrower-than-expected budget deficit gives the government leeway to spur economic activity in the last quarter, if needed.
Mr. Balisacan did note the risks posed by the possible "fiscal cliff" in the U.S., a series of tax increases and spending cuts that will take effect at the start of 2013 unless a budget deal can be reached. He also said an overly strong peso could hurt the country's export competitiveness and tourism, while also weakening the spending power of the families of overseas Filipino workers who send money home. The peso, like many other Asian currencies, has been gaining largely because of inflows of capital from investors looking to put money into emerging markets.
Still, Finance Secretary Cesar Purisima said the growth data validate investors' confidence in the country and in the government's continuing anticorruption campaign. He noted overall growth soared even as mining declined 2.2% for the period, "which shows that mining represents an extra gear for the economy once the regulatory environment is rationalized." Mining investments have dropped as the industry awaits a new government policy on the sector.
The Philippines' third-quarter growth rate—just behind China's 7.4% rise—made it the best performer in Southeast Asia, where economic performances during the period ranged from a 6.17% expansion in Indonesia to a 5.9% contraction in Singapore.
The country's services sector, which accounts for half of gross domestic product, expanded 7.0% from a year earlier, while construction and manufacturing growth pushed industry up 8.1%. Agriculture, which accounts for a fifth of GDP and employs four out of 10 Filipinos, rose 4.1%.
Even with the heady growth, Bangko Sentral ng Pilipinas Gov. Amando Tetangco said the central bank's easy monetary policy fits current conditions, but that the bank would be ready to make adjustments to manage price pressures and capital flows.
"In the near-term our policy stance appears to remain appropriate. We will continue to be watchful of market conduct and be sensitive to other economic indicators and movement of prices in other real and financial assets," he said.
The central bank has cut policy rates four times this year, for a total of one percentage point, to help cushion the economy from sluggish external demand.
The numbers announced Wednesday showed GDP up 1.3% from the previous quarter. The PSEi, the Philippine stock market's performance bellwether, closed at a record high of 5633.72 on the news, rising 0.9%, while the Philippine peso reached a five-year high of 40.855 against the U.S. dollar. The dollar closed at 40.90 Wednesday.
Some economists think there is still room for the Philippine economy to expand, with little risk of overheating as inflation remains low.
"Growth momentum is unlikely to ease, given that public-private partnership projects are still in the pipeline and could boost growth in 2013. Meanwhile, we look for exports to perform better once the global economy improves," said Jeffery Ng, an economist at Standard Chartered Bank.
Eugenia Victorino, an economist at ANZ, ANZ.AU -0.32%said: "Today's strong print underscores our view that the Philippines is becoming a 'low beta' [less-volatile] economy with respect to global growth." ANZ raised its growth forecast for this year to 6.1% from 5.6% previously.
Credit Suisse CSGN.VX 0.00%economist Santitarn Sathirathai said the data reduced the possibility of the central bank cutting rates in a bid to temper capital inflows. That may mean the central bank will have to rely on measures such as curbs on the real estate sector to limit foreign funds coming in, he said
