MANILA – The Philippine economy grew at its fastest annual pace in more than three decades in the second quarter, rebounding from a COVID-induced slide a year ago, but tighter restrictions are clouding the outlook, reinforcing an accommodative monetary stance.
Gross domestic product (GDP) rose 11.8% in the June quarter, the largest year-on-year expansion since the fourth quarter of 1988, the statistics agency said on Tuesday.
The Philippine economy emerged from a recession after five consecutive quarters of contraction. Economists in a Reuters poll expected GDP to expand 10% year-on-year in the second quarter.
The economy, however, contracted a seasonally adjusted 1.3% in the April-June period, after growing 0.3% in the previous quarter.
The figures come ahead of the Bangko Sentral ng Pilipinas (BSP) policy review on Thursday. Before the release of the GDP data, the central bank was expected to keep the policy rate at a record low of 2.0%.
“The strong performance is driven by more than just basic spin. It is the result of a better balance between addressing COVID-19 and the need to restore people’s jobs and incomes, ”said Secretary of Socio-Economic Planning, Karl Chua.
Household consumption grew 7.2% in the second quarter from a COVID-induced drop a year ago, but public spending fell 4.9%, the first year-on-year contraction since 2017.
The industrial and service sectors grew 20.8% and 9.6%, respectively, from the second quarter of 2020, while agriculture, forestry and fishing contracted 0.1%.
The economy needs to grow 8.2% in the second half of the year to reach the lower limit of the government’s annual growth target of 6.0% to 7.0%, said the head of the Philippine Statistics Authority, Dennis Map.
Economists say this looks increasingly unlikely as tightening restrictions dampen the economic outlook. The government has reimposed movement restrictions in Greater Manila and some provinces since August 6, as infections have risen in the country with the second-worst coronavirus outbreak in Southeast Asia.
The Philippines has seen an increase in cases of around 8,000 to 10,000 a day in recent weeks, up from the daily average of 5,700 cases reported last month.
Capital Economics cut its 2021 growth forecast to 5% from 6% on Tuesday. ANZ said it cut its full-year growth forecast last week to 4.2% from 4.8%.
“COVID cases re-emerged in July-August, subjecting the capital region to heavy restrictions. This will affect the growth prospects for the second half, although the vaccination rate has improved lately, ”ANZ analysts said in a note.
Although they said that the “real burden to reactivate the economy lies in fiscal policy”, hoping that the central bank will maintain its accommodative stance, the capital economy is betting on greater monetary easing.
“The weakness of the recovery increases the possibility that the central bank will cut rates again,” said Alex Holmes, an economist at Capital Economics. (Written by Enrico Dela Cruz; Edited by Ana Nicolaci da Costa)