Tuesday 30th August, 2011 (Source: Business Week)
Aug. 31 (Bloomberg) -- Philippine growth slowed for a fourth straight quarter after faltering global demand curbed exports and investment eased, adding to signs Asia’s expansion is weakening and complicating efforts to combat inflation.
Gross domestic product increased 3.4 percent in the second quarter from a year earlier, compared with a revised 4.6 percent gain in the three months through March, the National Statistical Coordination Board said in Manila today. The median estimate of seven economists surveyed by Bloomberg News was for expansion to ease to 4.1 percent.
Slowing expansion from Taiwan to India and Malaysia has reduced the scope for Asia’s policy makers to raise interest rates, as they balance the need to battle inflation against protecting their economies from the European debt crisis and a weakening U.S. recovery. President Benigno Aquino, who has pledged to boost growth to as much as 8 percent annually, is in China this week to boost trade and investment.
“There is a need to implement policies to help growth recover, which includes attracting more investments, keeping interest rates low,” said Antonio Espedido, treasurer at China Banking Corp. in Manila. “It’s a tough juggling act but it seems growth is the bigger problem now, not inflation.”
Policy ‘Flexibility’
The Philippine central bank has “more flexibility” to maintain its benchmark overnight borrowing rate as inflation is slowing, Economic Planning Secretary Cayetano Paderanga said in Manila today. Easing expansion “could indeed moderate domestic demand and inflation,” Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said in a mobile-phone text message, adding that the lower economic momentum will be an “important consideration” in the next monetary policy meeting on Sept. 8.
The Philippine peso has fallen against the dollar this month, declining along with most Asian currencies outside Japan on signs economies are cooling in the region. The currency rose 0.2 percent today, according to Tullett Prebon Plc, as Paderanga said a 5 percent growth rate this year is “achievable” and the government is going to aim for faster expansion.
Benchmark five-year bond yields due April 2016 fell for a sixth day today, according to Philippine Dealing & Exchange Corp. The Philippine Stock Exchange Index gained 1 percent, ending three days of losses on its first trading day after holidays this week.
Exports Tumble
Bangko Sentral has paused after increasing the benchmark interest rate twice earlier this year to 4.5 percent. Instead, on July 28 it ordered lenders to set aside more money as reserves for the second time this year.
Thailand’s growth unexpectedly slowed last quarter, a report showed this month, as the nation joined China, South Korea, Hong Kong, Malaysia, Singapore and Taiwan in reporting the slowest expansions since 2009. India’s GDP rose 7.7 percent in the three months ended June 30 from a year earlier, easing from a 7.8 percent climb in the previous quarter, a report showed yesterday.
Philippine exports tumbled the most since September 2009 in June, with shipments abroad dropping 9.4 percent from a year earlier. Overseas sales account for about 30 percent of the $200 billion economy.
Inflation in the Philippines accelerated to a 26-month high of 5.2 percent in June before easing in July. Rising prices are crimping profits at companies including Jollibee Foods Corp., the nation’s largest restaurant operator, and food company RFM Corp., which said last month it may miss its earnings target this year.
Accelerating Projects
Aquino plans to build more than 700 billion pesos ($17 billion) of roads, airports, and schools to lift incomes in a nation where the World Bank estimates about one out of four people live on less than $1.25 a day.
The government may implement ahead of schedule projects planned for 2012 to help the economy recover, Budget Secretary Butch Abad said in an e-mailed statement today.
“We intend to further increase spending not only by accelerating existing projects but also by spending on additional projects allowed by the available fiscal space brought about by significant savings we have attained,” he said.