By Karen Lema and Neil Jerome Morales MANILA, Aug 9 : Philippine economic growth unexpectedly slipped to near three-year lows of 6.0 percent in the second quarter, putting at risk the government’s full-year goal and adding to the challenge for the central bank’s rate hike plans as its board meets to review policy later in the day.
The year-on-year growth was well below the 6.7 percent forecast in a Reuters poll of economists and was slower than the downwardly revised 6.6 percent growth in the first quarter.
The GDP data was released ahead of a meeting by the central bank’s policy-making Monetary Board, which is widely expected to raise the benchmark interest rate for a third time this year to contain price pressures.
A Reuters poll, taken before the GDP data, predicted a 50-basis-point rate hike, but some economists say the central bank could exercise caution.
“The central bank will be cautious following the GDP data, but the key issue is inflation,” said Chidu Narayanan, economist at Standard Chartered Bank in Singapore. Narayanan still expects a 50 bps rate increase, to add to the central bank’s two earlier rate hikes of 25 bps each.
Following the data, Manila’s benchmark share index fell as much as 1.3 percent. The peso dipped slightly against the U.S. dollar.
The second-quarter growth matched the 6.0 percent pace in the third quarter of 2015.
Economic Planning Secretary Ernesto Pernia told a news conference the data was disappointing, adding that “this growth is less than what we have hoped for.” “To be fair and put things in proper context, the slowdown is partly due to policy decisions undertaken that are expected to promote sustainable and resilient development.” He said factors that contributed to the slower growth were the closure of several mines as part of an environmental crackdown and the six-month shutting of the country’s biggest tourist destination, Boracay island, which draws two million annual visitors.
The government was also “gravely concerned” about almost stagnant growth of the agriculture sector.
Higher food and transport costs, and a weak peso, lifted inflation to 5.7 percent in July, the fastest annual pace in over five years and near the top end of the central bank’s 5.1-5.8 percent forecast for that month.
Manila is targeting growth of 7-8 percent this year, which is more optimistic than the 6.8 percent growth forecast of the Asian Development Bank and the International Monetary Fund’s 6.7 percent projection for 2018.
Pernia said the economy has to expand by 7.7 percent in the second half of the year to achieve the lower end of the government’s target.