Philippine growth slowest in more than a year, steels for typhoon rebuilding
MANILA (Reuters) - Annual growth in the Philippines cooled to its lowest in more than a year in the third quarter, and this month's destructive typhoon is set to dim the lights further in one of Asia's fastest growing economies.
Growth is expected to slow sharply in the fourth quarter, with the government forecasting that as much as 0.8 percentage point could be shaved off annual GDP in the final months of the year.
The economy grew 7.0 percent in July-September from a year earlier, data released by the economic planning agency showed on Thursday, the slowest pace since the second quarter of 2012, and below the 7.3 percent predicted by economists. In the second quarter, the economy expanded 7.6 percent.
Despite the expected slowdown, most analysts agree the loss of output from typhoon Haiyan, which killed at least 5,560 people and reduced most of what was in its path to rubble, will not derail an economic revival overseen by President Benigno Aquino.
The economic planning agency said the government expects full-year GDP growth will likely be close to the high end of Manila's 6-7 percent goal, and is confidently targeting 6.5 to 7.5 percent in 2014.
That optimism is shared by analysts, who see only a temporary setback for Southeast Asia's rising economic star as an expected jump in activity from typhoon rebuilding makes up for the near-term loss of output.
"The lagged impact of an accommodative monetary policy, coupled with our expectation of a stronger export cycle and likely massive reconstruction work will support GDP growth in 2014," Michael Wan and Robert Prior-Wandesforde, analysts at Credit Suisse in Singapore, said in a note.
Areas most devastated by the typhoon account for a small portion of the economy, with the central Visayas region making up just 12 percent of GDP, they said.
Rebuilding will be costly. Manila estimates it may have to spend as much as $5.8 billion to rehabilitate and rebuild typhoon-ravaged communities.
The government faces a daunting task of re-housing more than 4 million people displaced by the typhoon, the deadliest to hit the Philippines in recent history.
Fortunately, Aquino's efforts to recharge an economy once derided as the "sick man of Asia" has put it in the best shape it has been in years and earned the nation investment-grade status from all three credit ratings agencies this year.
Aquino has won praise from several quarters, including the World Bank and International Monetary Fund, as the president set about improving public finances, fighting corruption, and boosting government spending on infrastructure and roads.
"If we can get this reconstruction and rehabilitation on the ground quickly, that should impact on growth and ...allow us to recover quickly the loss in GDP arising from the destruction," socioeconomic planning Secretary Arsenio Balisacan told a media briefing.
Thursday's data also showed the economy grew a seasonally adjusted 1.1 percent in the July-September quarter from the previous three months, missing forecasts of 1.4 percent, and slowing from a revised 1.6 percent in the second quarter.
Growth was supported by strong domestic demand and a recovery in exports, offsetting weaker output from the industry and services sectors.
The peso extended its losses after the data, easing 0.1 percent, while the stock market was up 1.3 percent at noon break.
STRONG FISCAL POSITION
The Philippines has been one of the fastest-growing economies in Asia this year, bolting ahead at an annual rate of around 7.6 percent in the first half, in step with China. It grew 7.4 percent in the first nine months against China's 7.7 percent.
This economic strength has translated to a strong fiscal position, meaning the cost of typhoon reconstruction isn't expected to substantially strain the government's finances.
The government's budget shortfall of 101 billion pesos ($2.3 billion) in the nine months to September is less than half of its 238 billion peso deficit target this year.
This week, Congress set up a 100 billion pesos ($2.3 billion) reconstruction fund as part of 2.26 trillion pesos of budget spending for next year, a 13 percent increase on 2013.
The Philippine central bank has raised its inflation forecast for this year and next due to damage to agriculture and supply channels, but said current policy settings remain appropriate.
"The GDP performance in Q3 attests to the underlying constructive dynamics of the economy. These developments affirm to the appropriateness of current monetary policy settings," central bank Governor Amando Tetangco said in a mobile text message to reporters.
The central bank, which meets to review policy for the last time this year on December 12, is expected to stand pat. The overnight borrowing rate has been at a record low of 3.5 percent since October 2012 when it was cut by 25 basis points.
($1 = 43.6850 Philippine pesos)
(Reporting by Karen Lema; Editing by Shri Navaratnam)