Philippine GDP Growth Quickens to 6.8% on State Spending

Philippine economic growth quickened to 6.8 percent last quarter as government spending surged, adding pressure on the central bank to raise interest rates to curb inflation. The peso and stocks rose.

Key Points
Gross domestic product rose 6.8 percent in the first quarter from a year earlier, the statistics bureau said in Manila on ThursdayThat matched the median estimate of 17 economists in a Bloomberg survey and compared with growth of 6.5 percent in the fourth quarterCompared with the previous quarter, GDP grew 1.5 percent

President Rodrigo Duterte is boosting spending to a record to sustain one of the world’s fastest-growing economies. Projects include bridges and a subway to help ease traffic in the capital, another international airport north of Manila and railways to the provinces.

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“The central bank will hike rates,” said Euben Paracuelles, an economist at Nomura Holdings Inc. in Singapore. “Growth momentum has been retained at a decent pace and is still supportive of a rate hike.”

The booming economy has fueled concern of overheating and with inflation at a five-year high, the era of record-low interest rates may be approaching its end. The central bank is forecast by a majority of economists to tighten monetary policy on Thursday.

What Our Economists Say…A rate hike is already anticipated by the money market. What’s more, the peso has stabilized in part on the basis of rate hike expectations — gaining ground against the U.S. dollar when Asian peers fell. Failure to follow through with a hike today could trigger another sharp slide in the currency.

– Tamara Henderson, Bloomberg Economics

Click to read how the Philippines is next emerging market to raise rates

The peso gained 0.1 percent as of 10:29 a.m. in Manila. The benchmark stock index climbed 0.7 percent.

Other DetailsGovernment spending gained 13.6 percent from a year earlier, the fastest pace since 2016Consumer spending growth eased to 5.6 percentCapital formation increased 12.5 percent, while exports rose 6.2 percent

Click here to see a table of GDP component breakdown by expenditure, here for breakdown by industry

— With assistance by Michael J Munoz, Siegfrid Alegado, Ditas B Lopez, and Clarissa Batino

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