Philippine third-quarter growth slows to its weakest in more than a year

3:48 am Thursday, November 07th, 2024

By Neil Jerome Morales and Mikhail Flores

MANILA (Reuters) – The Philippine economy grew in the third quarter at its slowest annual pace in more than a year as severe weather disrupted government spending and dampened farm output, to strengthen the case for further policy easing.

Gross Domestic Product (GDP) grew 5.2% in the July-September on the year, government data showed on Thursday, below a Reuters poll forecast of 5.7%, for the most tepid rise since expansion of 4.3% in the second quarter of 2023.

The third quarter performance takes year-to-date growth to 5.8%, below the government’s full-year target of 6.0% to 7.0%, but officials expect growth to regain momentum in the last quarter on easing inflation and looser monetary policy.

“We expect these interventions to spur growth in private spending, particularly on big-ticket consumer items and investments in capital-intensive infrastructure,” Economic Planning Secretary Arsenio Balisacan told a press conference.

The benchmark stock index closed down 2.11% at an eight-week low. The peso currency weakened as much as 0.25% intraday to 58.805 per dollar.

Six storms in the third quarter delayed government projects, and ravaged crops that caused farm output to decline by the most in nearly four years to 3.7%, versus a slump of 3.2% in the previous three months.

Government spending slowed sharply in the third quarter, growing by 5% compared with 11.9% in the prior three months, while domestic consumption climbed slightly faster to 5.1% from 4.7% in the June quarter.

The slight improvement in consumer spending supported growth on a quarter-on-quarter basis, which accelerated to 1.7%, better than economists’ expectations for a 1.5% rise and the prior quarter’s 0.7% increase.

Despite the slight uptick in October, inflation has so far stayed within the central bank’s target of 2.0% to 4.0% for the year, giving it room to further cut interest rates after a reduction of 50 basis points in total at its last two meetings.

“The BSP may continue to cut interest rates in coming months, although aggressive rate cuts are unlikely due to domestic and external considerations,” Emilio Neri, lead economist at Bank of the Philippine Islands in Manila, said in a statement.

The central bank will meet on Dec. 19 to review policy.

“We expect the BSP to continue easing the policy rates, so that will add positive pressure on investments, particularly private construction,” Balisacan added.

($1=58.74 Philippine pesos)

(Reporting by Neil Jerome Morales and Mikhail Flores; Editing by John Mair and Clarence Fernandez)