PH Q2 GDP growth seen rebounding

MANILA (Reuters) – The Philippine economy is expected to have rebounded in the second quarter on higher government spending, although faltering exports and global markets turbulence triggered by a slowdown in China are seen tempering the growth outlook.

Gross domestic product (GDP) in Southeast Asia's fifth-largest economy is forecast to have risen 2.0 percent in the second quarter from the previous three months, according to a Reuters poll, after growth slipped to a six-year low of 0.3 percent in the March quarter.

Thursday's data were expected to show growth slightly accelerated an annual 5.6 percent, compared with 5.0 percent in the first quarter, setting the Philippines apart from many of its Asian peers that are either slowing or in a sluggish growth phase.

Efforts to reverse months of slow government spending have borne fruit with second quarter expenditure up more than 12 percent from last year.

On top of that, analysts say strong domestic consumption probably helped offset the contraction in farm output and weak exports. But with a slowdown in China and turmoil in its own markets and globally posing a growing risk to the Philippine economy, analysts are counting on Manila to meet its spending targets to support economic growth.

The downturn in China, Philippine's third-biggest export market, has hit many Asian economies reliant on shipments to the world's second-biggest economy.

"The main headwind to growth remains the persistent delay in infrastructure delivery. We believe that there is a lot of room for the government to support economic growth," said Eugenia Victorino, economist at ANZ bank in Singapore.

Government officials have said the Philippines can still hit the lower end of its 7 to

8 percent growth target this year, but economists are less optimistic and are forecasting growth at 6 percent.

"There is still a lot of catching up to be done in line with the 2015 fiscal program. But the improvements in the second quarter are likely to continue in the second half and hopefully in the first half of 2016 when El Nino's effect could be at its highest," said Jose Mario Cuyegkeng, economist an ING bank in Manila.

The Philippine central bank left its policy rate steady for a seventh straight meeting this month, citing low inflation and strong domestic demand. It has said it was ready to act to protect its inflation targets and ensure financial markets remain stable. It next reviews policy on Sept. 24.