Philippines Q2 GDP growth slows, rates seen steady
Second quarter growth eased 0.6 percent in seasonally adjusted terms, less than the 0.8 percent seen in a Reuters poll, dragged down by sluggish exports and weak state spending.
Gross domestic product was up 3.4 percent in the June quarter from a year earlier, data showed, slowing from the previous quarter's revised annual growth of 4.6 percent, and worse than the 4.4 percent expected by economists.
"Prospects for the second half of 2011 are better than the first half's performance," economic planning chief Cayetano Paderanga told reporters, adding agriculture was expected to lead growth, along with faster state spending especially on infrastructure projects.
"A strong economic performance in the last two quarters of 2011, however, is not without risks. Global downside risks could hamper our growth prospects," he also said.
RATES SEEN ON HOLD
Economists said they expected the central bank to keep rates steady for the third consecutive meeting on Sept. 8, and probably through the rest of the year, because of global growth uncertainties and easing inflationary pressures.
"In terms of the policy implication, this still supports our view that the BSP (Bangko Sentral ng Pilipinas) will be on hold for the rest of the year, especially because inflation should also be trending down because global fuel prices are also easing," said Euben Paracuelles, economist at Nomura in Singapore.
BSP Deputy Governor Diwa Guinigundo said in a text message to reporters ample liquidity in the financial system and low cost of money may support an increase in investments and domestic capacity that may drive growth going forward. The central bank held interest rates steady at a two-year high of 4.5 percent at its June and July meetings, but it raised bank reserves requirements at both policy reviews to make sure liquidity in the banking system was not excessive.
Electronics exports, the country's top shipment, fell around 24 percent in June, the second straight month of a decline. Total exports in June fell 10.2 percent, the biggest annual fall since September 2009.
Singapore and Thailand last week highlighted concerns about shrinking electronics exports, which are dragging down overall industrial production and economic growth numbers.
Paderanga said he was optimistic electronics exports would recover in the coming months as the supply of inputs from Japan normalises following the devastating earthquake and tsunami in March.
Most Asian countries have posted weak quarterly growth. Malaysia slowed to 4.0 percent in the second quarter from a year earlier, while Singapore contracted an annualised 6.5 percent from the previous three months. But Indonesia expanded at a robust 6.5 percent from a year earlier.
The government is targeting growth of 7 to 8 percent this year, but that would require growth of at least 9.9 percent in the second half given the first half data. Paderanga said the inter-agency committee in charge of setting the country's macroeconomic goals would review the growth target.
Copyright Reuters, 2011