MANILA: The Philippines rounded out 2014 as the fastest-growing economy in Asia after China, regaining momentum in the final quarter of the year on strong farm output and construction activity.
The surprising performance, which put Asia's fifth-largest economy on course to return to growth of around 7 percent this year amid cooling inflation, cements expectations the central bank will leave policy rates on hold for some time.
"Our economy has moved into a long-term growth path; 7 percent is quite sustainable and achievable," Socioeconomic Planning Secretary Arsenio Balisacan told a news conference. The economy grew 7.2 percent in 2013.
The fourth quarter grew a seasonally adjusted 2.5 percent over the prior three months and an annual 6.9 percent, beating economists' forecasts. Growth for the full-year came in at 6.1 percent, shy of the government's 6.5-7.5 percent forecast, but ranked second in the region to China's 7.4 percent clip.
The growth numbers support views the central bank will leave its benchmark interest rate steady at 4.0 percent when it meets on Feb. 12, and keep policy unchanged until at least the first half of the year.
"It validates our view that the most aggressive policy stance of the BSP (Bangko Sentral ng Pilipinas) based on our analysis for this year will be to keep rates steady, or stay put for the rest of the year," said Emilio Neri, chief economist at Bank of the Philippine Islands.
"We're not counting out the possibility of policy tightening later this year if the US does deliver on their own rate hike," he said.
BSP Governor Amando Tetangco said after the GDP data the central bank would revisit its forecasts and adjust its policy stance "as needed" if there are changes to inflation risks.
Inflation is forecast to ease to between 2-4 percent this year from 4.1 percent in 2014.
The peso weakened against the US dollar while the main stock index was flat.
STATE SPENDING KEY
ANZ said in a research note the central bank may start to adopt a dovish policy stance if public spending, which was weak for most of 2014, fails to recover in the first half this year.
State spending appeared to have improved in the last quarter of the year as public construction climbed 5.1 percent after two quarters of decline.
Overall construction, including double-digit growth from the private sector, jumped 20.5 percent in the fourth quarter, its best performance since the first quarter of 2013.
Government final consumption spending climbed 9.8 percent, rebounding from a 2.6 percent decline in the third quarter.
Finance Secretary Cesar Purisima said in a statement the government plans to boost spending on critical public investments using the "ample fiscal space" it achieved following reforms in the revenue agencies.
Farm and forestry output climbed 4.8 percent, reversing a 2.2 percent drop in the September quarter, as major rice- and corn-producing regions were spared from strong typhoons.
Manila has a 7-8 percent growth target for 2015 and 2016.
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