Growth surprises analysts

THE economy rebounded in the second quarter from its slowest growth in a decade, boosted by government spending and adding to signs Asian nations are recovering from the global recession.

The gross domestic product increased 1.5 percent from a year earlier, the National Statistical Coordination Board said yesterday. That was three times the 0.5-percent median forecast of 17 economists surveyed by Bloomberg News.

The economy expanded a revised 0.6 percent in the first quarter, the weakest pace since a recession ended in 1998.

Record-low borrowing costs and government stimulus are helping Asian nations from Thailand to Singapore report better second-quarter economic numbers.

President Gloria Arroyo has boosted spending to avoid a recession and help companies including SM Investments Corp. survive the slump.

The government’s “stimulus programs have been successful in preventing a slowdown,” said Jonathan Ravelas, a market strategist at Banco de Oro Unibank Inc.

“They should continue to pump-prime to create the necessary conditions for sustainable economic growth.”

The governments benchmark five-year bonds dropped a second day.

The government’s economic resiliency plan resuscitated the domestic economy during the second quarter, Romulo Virola, secretary general at the National Statistical Coordination Board, said.

The government had earmarked P330 billion this year to boost the economy in the face of the global slowdown, spending mainly on infrastructure building to create more jobs.

Construction grew 11.7 percent from 1 percent a year ago as public construction jumped 29.9 percent from minus 5.6 percent, data showed.

Finance Secretary Margarito Teves said faster economic growth might boost revenue and allow the government to increase spending.

“We would like to reiterate our appeal to Congress to support our proposed revenue enhancement measures,” Teves said in a mobile phone message.

The government’s “tax effort,” or the ratio of tax revenue to gross domestic product, improved to 15.3 percent in the second quarter from 11.5 percent in the preceding quarter, he said.

Economic Planning Secretary Augusto Santos said the economy would escape a recession and was on track to achieve 1.8 percent growth this year.

The government predicts expansion in the $167-billion economy will improve in the second half of the year as the global slowdown eases and state spending kicks in.

The central bank kept its benchmark interest rate unchanged at a record low of 4 percent last week after slashing borrowing costs by 2 percentage points from mid-December to July.

“They have done much easing, Economic Planning Director Dennis Arroyo said.

“It’s time for fiscal policy to work. The Philippine economy may grow more than the government target of 3.6 percent next year because the global recession is ending faster than expected.”

Consumer spending, which accounts for about 70 percent of the economy, rose 2.2 percent in the second quarter from a year earlier.

The “worst is over” for the country’s retailers, and the industry would grow moderately this year, a newspaper quoted Philippine Retailers Association chairman Jorge Mendiola as saying on Aug. 14.

SM Investments, whose assets include the Philippines’ biggest bank and largest shopping mall operator, said profit rose 16 percent in the second quarter as people spent more at its supermarkets and department stores.

The export of goods and services by companies including Intel Corp., which account for about a third of the Philippine economy, dropped 16 percent in peso terms in the second quarter from a year earlier. The decline in Philippine exports narrowed to the least in seven months in June as the region showed signs of recovery. –Karl Lester Yap and Cecilia Yap, Bloomberg, with Lawrence Agcaoili, Manila Standard Today