PH econ­omy likely to sus­tain strong mo­men­tum in Q3 – an­a­lysts

Manila Bulletin - - Business News - By EN­RICO DELA CRUZ (Reuters)

The Philippine econ­omy likely sus­tained its strong growth mo­men­tum in the third quar­ter, buoyed by brisk con­sumer and gov­ern­ment spend­ing, while higher ex­ports and agri­cul­tural out­put pro­vided a fur­ther boost.

The South­east Asian na­tion is among the fastest grow­ing economies in Asia al­though a weak peso and Pres­i­dent Ro­drigo Duterte's deadly war on drugs pose risks to the out­look.

An­a­lysts fore­cast the coun­try's gross do­mes­tic prod­uct ex­panded a sea­son­ally ad­justed 1.6 per­cent in the July-Septem­ber pe­riod from the sec­ond quar­ter, when it grew 1.7 per­cent.

On an an­nual ba­sis, the me­dian fore­cast from 17 an­a­lysts was for growth of 6.5 per­cent in the third quar­ter, match­ing the pace of the sec­ond quar­ter and mark­ing the ninth con­sec­u­tive quar­ter of growth above 6 per­cent.

Only five an­a­lysts gave quar­ter-on­quar­ter fore­casts.

The data will be re­leased on Thurs­day. "De­spite the con­tin­ued rise in ex­ports, in­dus­trial pro­duc­tion is show­ing signs of fa­tigue. Thus, we ex­pect se­quen­tial growth to have eased," said Eugenia Fabon Vic­torino of ANZ Re­search in Sin­ga­pore.

The econ­omy's per­for­mance re­flects the ex­port-driven growth else­where in Asia, which may con­tinue, an­a­lysts said.

"The run down in in­ven­to­ries in Q3 will likely pro­vide sup­port to ac­tiv­ity in the com­ing months as Asia con­tin­ues to ben­e­fit from the syn­chro­nised global re­cov­ery," Bar­clays said in a note.

Last week, So­cio-eco­nomic Planning Sec­re­tary Ernesto Per­nia said growth in the third and fourth quar­ters was likely to be faster than 6.5 per­cent, propped up by gov­ern­ment spend­ing, ex­ports and farm out­put.

Full-year growth should be around the cen­tre of the 6.5-7.5 per­cent tar­get, he said, more up­beat than an­a­lysts' me­dian fore­cast of 6.5 per­cent.

"Speed­ing up the pace of re­forms should help the coun­try reach the up­per-bounds of the tar­get," said Noe­lan Ar­bis of HSBC in Hong Kong, re­fer­ring to the pend­ing tax re­form leg­is­la­tion and the in­fra­struc­ture over­haul.

Duterte has pledged to mod­ern­ize the coun­try's air­ports, roads, rail­ways and ports un­der his $180-bil­lion, sixyear "Build, Build, Build" ini­tia­tive.

The gov­ern­ment aims for growth of 7-8 per­cent next year through 2022, when Duterte's six-year term ends. In­vest­ing in in­fra­struc­ture will have the high­est mul­ti­plier ef­fect on the econ­omy, Fi­nance Sec­re­tary Car­los Dominguez said at a re­cent busi­ness fo­rum.

The Philip­pines has man­aged to keep eco­nomic growth solid and in­fla­tion in check de­spite a weak peso, al­low­ing the cen­tral bank to leave pol­icy set­tings steady since Septem­ber 2014. The cur­rency is among Asia's worst per­form­ing, down nearly 3 per­cent against the US dol­lar so far this year.

The cen­tral bank has sig­nalled it is in no rush to al­ter pol­icy set­tings even as it ex­pects in­fla­tion to creep higher next year.

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