Philippines posts strongest economic growth in Asia at 7.1%

by Siegfrid Alegado, Cecilia Yap, November 17, 2016, http://www.bloomberg.com/news/articles/2016-11-17/philippine-growth-quickens-to-7-1-on-duterte-s-spending-spree

• Nation seen as among fastest-expanding in the world until 2018
• Outsourcing, remittances help guard against global risks

The Philippine economy grew at its fastest pace in three years last quarter, underscoring the nation’s resilience to global risks as investment surged and consumers spent more. Stocks gained.

Key Points

• Gross domestic product increased 7.1 percent from a year earlier, the Philippine Statistics Authority said in Manila Thursday. The median estimate of 15 economists surveyed by Bloomberg was 6.7 percent
• Compared with the previous quarter, GDP rose 1.2 percent, in line with economists’ estimates

Undeterred by risks such as Donald Trump’s protectionist ambitions and President Rodrigo Duterte’s rants against the U.S., the Philippine economy is set to expand more than 6 percent until 2018 to rank among the fastest-growing in the world, according to economists surveyed by Bloomberg. Last quarter’s growth exceeded China’s 6.7 percent and Vietnam’s 6.4 percent in the same period. India, which posted growth of 7.1 percent in the second quarter, is yet to publish GDP data for the three months through September.

Gifted with a young population and backed by $50 billion of revenue from remittances and outsourcing, the Philippines is getting an additional boost from Duterte’s $160 billion-infrastructure plan aimed at creating jobs. Projects include at least $1 billion of contracts to build an airport and a railway to transform a former U.S. military base into a commercial hub.

Markets

Philippine stocks rose a second day, climbing as much as 2.2 percent. They were up 1.1 percent as of 11:01 a.m. in Manila.

The peso was little changed at 49.32 per dollar.

Analyst Takeaways

“Philippines will remain an outperformer in the region,” said Rahul Bajoria, a senior economist at Barclays Plc in Singapore. “It is domestically driven, with consumption holding up quite well and the fiscal spending being planned. The global risks we’re seeing including to trade won’t fundamentally alter its prospects.”

“In the short term at least, we expect the economy will continue growing at a decent pace,” Gareth Leather, senior Asia economist at Capital Economics Ltd. in London, said in a note. “The foundations are in place for growth to remain strong, but recent political events, both in the US and domestically, have made the outlook much less certain.”

“Putting money on infrastructure-related stocks is the smart bet and it’s exactly what I am doing,” said John Padilla, who helps manage about $9.1 billion at Metropolitan Bank & Trust Co., the Philippines third-largest money manager. “This growth poses now more challenge for President Duterte to keep the pace. It supports the view that Philippines needs infrastructure to sustain this growth.”

Other Details

• Household spending, which makes up about 70 percent of GDP, rose 7.3 percent from a year earlier
  Government spending gained 3.1 percent
• Investment surged 20 percent