The stellar pace of expansion, which blew past expectations, pulled the peso up from an 11-month low and cemented views the central bank would leave its key policy rate on hold this year.
Growth is seen powering on after the Philippines earlier this month got an investment grade rating from Standard & Poor’s, the second debt agency to do so this year. That lowers borrowing costs and helps to attract foreign capital for an economy mired with high unemployment and poverty.
First quarter GDP grew a seasonally adjusted 2.2 percent over the prior three months, the fastest clip since the first quarter of 2012. A Reuters poll of economists had forecast 1.6 percent growth.
From a year earlier, the economy grew 7.8 percent, helped by robust domestic spending, making the Philippines the fastest growing economy in Asia as it pushed past China’s 7.7 percent annual pace and 1.6 percent quarterly growth.
The Philippines’ year-on-year GDP figure also topped the 6.1 percent growth forecast in a Reuters poll and was the fastest since the second quarter of 2010, then boosted by spending related to national elections that put President Benigno Aquino in power.
Capital formation jumped an annual 47.7 percent in the first quarter as the private sector invested heavily to expand capacity given strong domestic consumption.
Public construction climbed 45.6 percent as a faster budget roll-out and better fiscal position allowed for more spending to rehabilitate decrepit school buildings, roads and bridges.
Per capita GDP grew an annual 6.1 percent in the first quarter, the highest in at least two years, although unemployment was at a year-high of 7.1 percent as of March.
At a time when several regional central banks have cut rates to bolster growth, economists said the Philippine central bank would most likely leave its key overnight borrowing rate on hold for the rest of the year. Inflation is forecast to stay within the central bank’s 3 to 5 percent target band this year despite strong growth.
Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco said he did not foresee the inflation target being breached over the policy horizon despite strong GDP growth.
Source : Reuters | 30 May 2013