Philippine economy slows more than expected in Q3, annual growth target in doubt

MANILA: The Philippine economy slowed for a fifth straight quarter in the July-September period, weighed down by weaker household and government spending and a contraction in agriculture, putting the country on course to miss its growth target for the year.

Gross domestic product grew 2.1 per cent in the third quarter, slowing from the previous quarter's upwardly revised 2.4 per cent growth and remaining around its weakest pace in more than five years. A Reuters poll forecast growth at three per cent.

On a seasonally adjusted, quarter-on-quarter basis, the economy grew 0.1 per cent in the July-September period, down from 0.6 per cent in the previous quarter

The economy will need to grow 6.3 per cent in the fourth quarter to reach the lower end of the government's 3.5 per cent to 4.5 per cent full-year growth target, Economic Planning Secretary Arsenio Balisacan said in a press conference, after growth averaged 2.5 per cent in the first nine months.

Achieving that pace will be challenging as elevated inflation threatens to further curb household demand, a key driver of the Philippine economy. Annual inflation accelerated to a more than three-year high of 7.8 per cent in October and Balisacan said consumer prices were likely to remain elevated due to higher food and fuel costs.

Household spending slowed for a fourth consecutive quarter in July-September to 2.4 per cent and government consumption eased to 6.8 per cent from 8.3 per cent in the previous quarter.

Contributing to the economy's lacklustre performance was the 4.8 per cent contraction in farm output, reversing growth of 2.9 per cent in the June quarter.

Balisacan said the government's five to six per cent growth target next year remained achievable but would require strong investment, easing price pressures and recovery in business confidence, which has been battered by a corruption scandal involving flood control projects.

Government infrastructure spending contracted for a sixth straight quarter in the third quarter, falling 15.1 per cent compared with a 33.4 per cent decline in the second quarter.

The Bangko Sentral ng Pilipinas has already raised interest rates by a total of 125 basis points since April, including last month's larger-than-expected 50-basis-point hike, to rein in inflation, pushing up borrowing costs and adding another headwind for growth.

© New Straits Times Press (M) Bhd