PH economy keeps Asia lead with 'solid' 2017 growth


Posted at Jan 23 2018 10:17 AM | Updated as of Jan 23 2018 02:06 PM

MANILA - (UPDATE) Philippine economic growth narrowly missed forecasts in the last three months of 2017, while keeping its pace as among the fastest-growing in Asia.

Gross domestic product grew 6.6 percent in the October to December period, bringing the full year average growth to 6.7 percent.

The fourth quarter result compared to the 7-percent expansion in the third quarter of 2017 and 6.6 percent in the fourth quarter of 2016. Average growth in 2016 was at 6.9 percent.

Socioeconomic Planning Sec. Ernesto Pernia said fourth quarter growth was "solid" and reflected the "stable performance" of the economy. He said the decline from 2016 was expected coming from an election year.

Analysts surveyed by Reuters and Bloomberg had predicted growth of 6.7 percent in the fourth quarter.

The country's growth momentum, among Asia's fastest, is expected to persist well into 2018 as the government of President Rodrigo Duterte raises annual infrastructure spending under its record P3.8 trillion pesos budget this year.

"Government spending has been a substantial contributor to growth (in 2017)... This is an important development, if it persists, as it could suggest that the government is finally curbing its historical pattern of underspending," HSBC said in a research note.

The government's infrastructure push led to a surge in imports of capital goods last year, widening the trade deficit to a record in November.

While the deficit pointed to strong economic activity, the widening trade gap has added to worries a current account deficit could persist in 2018 and continue to pressure the peso, Asia's worst performing currency so far this year.

The prospect of a weaker peso and higher inflation, due to higher taxes plus rising oil and food prices, could persuade the central bank to hike rates in 2018 for the first time in more than three years, economists have said.

The central bank last hiked rates in September 2014. It set the overnight borrowing rate at 3 percent when it moved to an interest rate corridor system in June 2016.

"The central bank is focused more on inflation rather than the GDP numbers, so that means the pressure is still there for the central bank to raise interest rates especially if inflation stays close to or hits the upper end of the target range," said Angelo Taningco, economist at Security Bank in Manila.

Inflation averaged 3.2 percent in 2017, above the midpoint of the central bank's 2-4 percent target for that year.

Industry, which grew 7.3 percent in the fourth quarter, contributed most to fourth quarter GDP, followed by services, which climbed 6.8 percent from last year and agriculture, which grew an annual pace of 2.4 percent.

"Certainly the Philippine economy remains strong and there is still more room to grow," Economic Planning Secretary Ernesto Pernia told a media briefing.

-- with reports from Reuters