Philippines’ Q3 growth beats expectations, outlook less certain

MANILA: The Philippine economy grew at its fastest pace in more than three years in July-September, most of president Rodrigo Duterte’s first 100 days in office, setting him up to meet the ambitious target he set for the year.

Duterte’s government was quick to take advantage of the favourable figures, saying they showed that the president “offers more than ‘war on drugs’.” Duterte, a former prosecutor who was elected in May on promises of a fierce campaign against crime and illicit drugs, said in a speech yesterday that addressing corruption and criminality were the “building blocks of a strong and resilient economy.”

But the president’s controversial comments, plus the uncertainty surrounding US labour and trade policies after the election of Donald Trump, have left the Philippines’ economic outlook “much less certain,” said Gareth Leather, senior Asia economist at Capital Economics in London.

“With Duterte in charge it is hard to rule out a sudden shift in economic policy or a disruption of the political stability that has characterised the last six years,” Leather said in research note.

Duterte inherited an economy that has enjoyed 70 quarters of uninterrupted growth, buoyed mainly by domestic demand fuelled by remittances from migrant workers.

That momentum, further boosted by election campaign spending in the first two quarters of the year, resulted in the third quarter's forecast-topping 7.1% growth.

Such rapid expansion made the Philippines the fastest-growing economy in Asia by far, outpacing even China.

On a quarter-on-quarter basis, gross domestic product expanded 1.2%, the national statistics agency said, slightly above the 1.1% growth projected in a Reuters poll, but slower than the previous quarter’s 2.1%.

“We are confident that we will grow within the 6%-7% growth target,” socio-economic planning director Reynaldo Cancio told a briefing. Growth in the third quarter was supported by household consumption, which sustained its 7%-plus annual rate pace.

Fixed capital investment growth topped 20%, with public construction continuing its double-digit growth.

Private construction grew a sharp 16.2% in the third quarter compared with 8.0% over April-June.

Bangko Sentral ng Pilipinas governor Amando Tetangco said yesterday there was no need to adjust monetary policy at this time. While it may be too early for Duterte to take credit for the strong GDP result, it should give him a strong start, said Nomura economist Euben Paracuelles, noting investors would want to see signs that the momentum could be sustained.

The 71-year-old Duterte has vowed to accelerate and raise infrastructure spending to lift growth to 7%-8% during his six-year term, create more jobs and reduce poverty.

But the outspoken leader’s anti-US rhetoric and brutal war on drugs, which has alarmed rights groups, are unnerving markets and foreign investors.

The peso is hovering at near eight year lows while the stock market has nearly erased its gains this year. Duterte’s economic managers were quick to allay such concerns about Duterte’s unpredictability and the resulting uncertainty, saying the government will aggressively push ahead with its infrastructure pledges.

He has approved the rollout of 500 billion pesos (US$10.12bil) worth of roads, railways, airports and seaports to boost economic growth since he began his term on June 30. Reuters