Philippines Q2 GDP slowest in three years

MANILA: Philippine economic growth unexpectedly weakened to a near threeyear low in the second quarter, putting at risk the government’s full-year goal and raising pressure on the central bank to be less aggressive on its rate hike plans when it reviews policy later in the day.

Gross domestic product grew 6% in April-June, well below the 6.7% forecast in a Reuters poll of economists and slower than the downwardly revised 6.6% growth in the first quarter. The second-quarter growth matched the 6% pace in the third quarter of 2015.

The Philippine economy remains one of the fastest growing in Asia, but the surprise GDP slowdown increases the challenge for a government that is funding a multi-billion infrastructure overhaul and a central bank grappling with rising inflation.

The GDP data was released ahead of the central bank’s policy announcement at around 0800 GMT, at which it is widely expected to raise the benchmark interest rate for a third time this year to fight inflation that hit another five-year high in July.

A Reuters poll, taken before the GDP data, predicted a 50-basis-point rate hike, but some economists say the central bank could exercise caution.

“The central bank will be cautious following the GDP data, but the key issue is inflation,” said Chidu Narayanan, economist at Standard Chartered Bank in Singapore. – Reuters