MANILA: The Philippine economy unexpectedly slowed in the September quarter from the previous three months and the government said it will be difficult to hit its full-year growth goal, raising the chances of a rate cut as early as this week.
A double-digit drop in construction due to weak state spending and slowing exports that dampened third quarter growth will likely be discussed by policymakers when they meet on Thursday to review the central bank's interest rates.
Before the data was released, the Bangko Sentral ng Pilipinas (BSP) was widely seen holding its key rate steady at 4.5 percent with inflation seen to stay manageable and given mounting concern about the global economy.
But now, some analysts have different expectations.
"Slow growth, and the prospect for much weaker global growth in 2012, as well as the weakness in investment spending, may prompt the BSP to cut rates (on Thursday) as insurance, following Bank Indonesia's lead," said George Worthington, chief economist for Asia-Pacific at IFR Markets, a unit of Thomson Reuters.
"The market and IFR previously expected no move this week, but the steep slowdown in the economy's momentum, with no end in sight to the slump in electronics, provide support for a move even with inflation still relatively high," he said.
Others think the central bank should keep rates steady for now given some pressure on inflation, which may stay above 5 percent in the near term.
"This weak (GDP) number gives them more reason to accelerate spending. But in terms of monetary policy, I think it's a little bit of a less straightforward answer because while growth is evidently slowing... inflation remains high," said Euben Paracuelles, economist at Nomura in Singapore.
SLOWING GROWTH
Data on Monday showed the economy grew 0.3 percent in the September quarter on a seasonally adjusted basis, much slower than market expectations of 1.3 percent growth and lower than the previous quarter's downwardly revised 0.5 percent expansion.
From a year earlier, the economy grew 3.2 percent, weaker than the 4.3 percent expected by economists and just a shade higher than a revised 3.1 percent growth in the second quarter.
With the nine-month growth at 3.6 percent from a year earlier, the economy would need to climb 6.9 percent in the December quarter to hit the lower end of its revised growth forecast of 4.5 to 5.5 percent this year.
Philippine policymakers still see growth gaining momentum in the last three months of the year owing to robust domestic consumption and an expected pick up in government spending which should help offset sluggish exports.
But Economic Planning Secretary Cayetano Paderanga said it would be difficult to hit the government's growth goal this year, adding a strong pick-up in state and public spending was necessary to pull up full-year growth.
Singapore and Taiwan last week highlighted concerns about the weakness in Western economies and fading global demand. Singapore said it expects a contraction in the current quarter while Taiwan trimmed its 2011 and 2012 growth forecasts.
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