Phl grows 7.1% in Q3, beats market forecast

MANILA, Philippines -  Driven by  the services sector, the Philippine economy grew faster than expected in the third quarter.

The National Statistical Coordination Board on Wednesday announced that the gross domestic product, the sum of all trades and goods produced within the country, in July to September expanded 7.1 percent, beating market expectations of a third quarter growth of between 5 and 6 percent. The Philippine growth was the second-fastest in East Asia, only behind China's 7.4 percent and the fastest in Southeast Asia.

"The beyond expectation third quarter growth was driven by the Services sector with the robust performances of Transport, Storage  & Communication, Financial Intermediation, and Real Estate, Renting & Business Activities supported by the five consecutive quarters of sustained accelerated growth of the Industry and the seemingly weather tolerant Agriculture sector, " the NSCB said.

The third quarter performance brought the January to September growth to 6.5-percent expansion, better than the government's target of economic growth of between 5 and 6 percent for the year.

"Overall, the Philippines' third quarter GDP growth was the highest in ASEAN. Indonesia came in second with 6.2 percent, followed by Malaysia (5.2 percent), Vietnam (4.7 percent), Thailand (3 percent) and Singapore (0.3 percent). On the other hand, China registered a 7.4-percent GDP growth in the said period," Balisacan said.

NSCB Secretary-General Jose Ramon Albert said the robust third quarter growth was driven by the services sector, which grew by 7 percent in the third quarter.

The industry sector also posted growth for the fifth consecutive quarter, growing by 8.1 percent. Meanwhile, the weather-tolerant agriculture sector grew by 4.1 percent, Albert said.

Balisacan added that household spending, which grew by 6.2 percent accounted for more than half of the third quarter GDP growth on the demand side, while services made up for 58 percent of the GDP on the supply side.

Moreover, government spending grew for the sixth consecutive quarter, soaring by 12 percent from the 8.9 percent last year, NSCB said.

In spite of the country's positive performance, Balisacan said the country will face challenges coming into the fourth quarter.

"The problems in the Euro area remain unsolved. There is also the looming fiscal cliff in the US (United States). The slow recovery in the US economy continues to affect us negatively as their monetary authorities try to prop up their economy through quantitative easing," Balisacan said, adding that this results in peso appreciation which erodes the country's competitiveness.

"Rest assured that we are monitoring this development closely," he said.

'Broad-based growth'

Finance Secretary Cesar Purisima said the better than expected growth reflected the "investor and consumer confidence in the Philippines."

"The 3rd quarter GDP growth rate of 7.1 percent shows that the economics of good governance or 'Aquinomics' works...This is the ultimate public-private sector partnership. Government takes care of fiscal sustainability, macroeconomics stability and continued business facilitation while the private sector responds with more investment and consumption," Purisima said.

'Appropriate'

Despite the high economic growth, Bangko Sentral ng Pilipinas governor Amado Tetangco believes that the "near-term" policy stance of the Monetary Board remains appropriate. In October, the BSP has slashed key rates to new record-lows to shore up the local economy amid the global slowdown.

"The confluence of nimble monetary policy, steadfast fiscal action, and swift government responses has sustained the economy on this path. Going forward, the BSP will be careful to calibrate the use of its enhanced policy tool kit to help ensure that domestic aggregate demand price pressures(as the economy continues on this high growth path) and risks from capital flows (as more investors become convinced that the country is a value investment) are managed," Tetangco said.

He added: "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 movements of prices in other real and  financial assets."