Philippines' Q1 GDP growth seen accelerating to 2.9% q/q


Posted at May 24 2012 05:26 PM | Updated as of May 25 2012 01:27 AM

Annual Q1 growth seen at 4.6% vs 3.7% in Q4

MANILA, Philippines - The Philippine economy may have grown at its fastest quarterly pace in two years in January-March, helped by higher state spending and a recovery in exports, strengthening the case for the central bank to keep interest rates on hold next month.  

Bucking a global slowdown, the Southeast Asian economy likely expanded a seasonally adjusted 2.9 percent in the first quarter from the previous three months, a Reuters poll showed on Thursday, picking up sharply from 0.9 percent in the last three months of 2011, and the highest since the first quarter of 2010. 

From a year earlier, growth may have accelerated to 4.6 percent, stronger than the fourth quarter's 3.7 percent. 

However, analysts doubt this year's 5 to 6 percent growth target will be met as sluggish global demand clouds the outlook for the country's electronics-dominated exports. 

"The main risk arises from external developments confronting the Philippines' narrow export base," said Aninda Mitra, an economist at ANZ. "If developments in Europe affect regional demand more adversely, then the downside risks will rise."  

Exports, which account for two-fifths of the country's gross domestic product, fell for the first time in three months in March, after climbing 12.8 percent in February and 3.1 percent in January, as growth in electronics shipments slowed. 

But central bank Governor Amando Tetangco said late on Wednesday the Philippines was resilient enough to cope with a slowdown in advanced economies, even as he ruled out a break-up of the euro zone. 

"From the standpoint of the Philippines, (the) EU problem can be likened to a pain in the shoulders... you can feel it but it's not going to cripple you," Tetangco said.    

"We will be able to absorb any shocks because of our sources of resilience, such as external reserves, improving macroeconomic fundamentals, and improving fiscal position."  

Manila ramped up spending in the early part of the year, bolstering economic activity. But the spending level in the first three months of 2012, while 13 percent higher than last year, was below earlier projections. 

Tetangco has said there was less need to support the economy with the pick-up in exports in recent months and higher state spending. 

The central bank next reviews base interest rates on June 14. They are currently at an all-time low of 4.0 percent following two cuts totalling 50 basis points in January and March.