Sunday, 28 November 2010

Growth during Aquino’s 1st quarter slows to 6.5%

AP and Bloomberg, with Elaine Ramos-Alanguilan
Manila Standard

ECONOMIC growth slowed to 6.5 percent in the third quarter, the Aquino administration’s first quarterly slowdown, as weakness in agriculture and other industries offset strong consumer spending, the government said Thursday.

The service sector remained the key source of domestic growth while industry failed to sustain its recovery from the first half, the National Statistics Office and National Statistical Coordination Board said.

A decline in agriculture because of a dry spell, diminished government spending, and substantial deceleration in the mining and quarrying industries also contributed to the slower growth, the government said.

President Benigno Aquino III said he expected a full-year growth of 7 percent despite concern that the peso’s value would hurt exports and the dollar remittances sent by the millions of Filipinos working abroad.

The third-quarter growth compares with the 7.9-percent expansion in the first quarter and the 8.2-percent acceleration in the second quarter. But it was slower than the 7.3-percent median forecast of 16 economists surveyed by Bloomberg News and is the weakest pace this year.

Asia’s growth is moderating after the region led the world out of last year’s slump, with Malaysia and Thailand’s economies expanding the least in three quarters from July to September.

The Bangko Sentral, which has refrained from raising borrowing costs this year to support the economy, could keep interest rates steady “for some time,” Governor Amando Tetangco said Thursday.

“It looks like the policy environment in the Philippines will remain growth-friendly,” said Prakash Sakpal, a Singapore- based economist at ING Groep NV.

“There are worries about a global slowdown and the government is not loosening its purse. There is little chance of a rate hike soon.”

The Philippine benchmark stock index dropped for a fourth day and the peso fell to near a two-month low on Thursday.

Universal Robina Corp. fell to the lowest in more than two months, leading a decline among consumer-related stocks in the Philippines after data showed that consumer spending grew at the weakest pace in a year.

As faltering recoveries in the US and Europe threaten demand for Asian goods, President Benigno Aquino’s pledge to create jobs and cut poverty may also be hampered by a 4.5-percent gain in the peso against the dollar this year that’s undermining the value of remittances.

The money sent home by the more than 8 million Filipinos living in countries including the US and Saudi Arabia account for about a 10th of the economy and help support demand for homes and loans.

“The strength of the peso is sapping the spending appetite of the families of overseas Filipinos,” Emilio Neri, an economist at Bank of the Philippine Islands, said before the report.

“Government spending is also slacking as the new administration wants to signal fiscal discipline.”

The peso rose to the strongest level in more than two years earlier this month, reaching 42.47 to the dollar on Nov. 4. The central bank has eased the rules on foreign-exchange outflows and capped dollar supply in the market by allowing currency swaps to mature as it joined regional counterparts in seeking to slow excessive currency gains.

A stronger peso cuts the purchasing power of remittance-dependent Filipino families and may crimp the record gains in Philippine exports.

The country’s overseas sales increased 46.1 percent in September from a year earlier to an unprecedented $5.31 billion, the biggest jump on record.

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