The Philippine economy grew a seasonally adjusted 2.0 percent in the second quarter, in line with expectations, but annual growth slipped to 4.6 percent after the government sharply revised first quarter growth.

The revisions showed the economy growing 4.7 percent in the first quarter from a year earlier compared with the previous figure of 5.2 percent.

KEY POINTS:

- Second quarter GDP rose 4.6 percent from a year earlier (Reuters poll forecast +5.0 percent)

- Seasonally adjusted GDP grew 2.0 percent in the second quarter from the first quarter (Reuters forecast +2.0 percent)

- Second quarter gross national product (GNP) rose 5.5 percent from a year earlier.

- The government revised down Q1 growth to 4.7 percent.

- In the first half, GDP was up 4.6 percent compared with the same 2007 period.

COMMENTARY:

VISHNU VARATHAN, ECONOMIST, FORECAST PTE

“It’s softer than expected. I think that kind of highlights the point that the central bank will probably do well to instil price stability because growth without price stability is probably not going to be a sustained one.

I think in coming months you’ll probably see below trend growth persisting as global headwinds continue to hit the export sector and the manufacturing sector.

This leaves the BSP (Philippine central bank) some scope to tighten a bit more before they start holding, then easing rates later into 2009.

I think for now the argument that slower growth should mean that the BSP should not hike rates today is a flawed one because inflation still lingers around the corner.”

MARKET REACTION:

- The peso <PHP=> was quoted at 45.68 per dollar in morning trade, sharply weaker than its close on Wednesday at 45.73.

- The Philippine stock market <.PSI> was up 0.59 percent.

LINKS:

- For more data, the National Statistical Coordination Board Web site is http://www.nscb.gov.ph

BACKGROUND:

- The government had estimated second quarter annual economic growth at 5.3-5.9 percent, but Socio-economic Planning Secretary Ralph Recto later said the number may have slipped below 5.2 percent.

- The economy grew 7.2 percent in 2007. It grew 5.5 percent in 2006, 5 percent in 2005 and 6.2 percent in 2004.

- The Philippines’ main economic drivers are exports of electronics and some farm goods, and domestic demand.

- Inflation, which climbed to a near 17-year high of 12.2 percent year-on-year in July, is seen crimping demand this year.

- First half merchandise exports rose only 4 percent from a year earlier, and the government has cut its full-year growth forecast to 6 percent from an earlier 8 percent.

- Domestic consumption, which makes up about 70 percent of GDP, is fuelled by the remittances from more than 8 million Filipinos working abroad, out of a total estimated population of 89 million.

Source: http://www.afxnews.com

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