Philippines Q2 GDP growth quickens on construction boom, topping forecasts

Workers stand on steel bars as they work at a construction site in Manila.
Workers stand on steel bars as they work at a construction site in Manila. PHOTO: AFP

MANILA (REUTERS) - The Philippine economy grew at a sizzling pace in the second quarter, topping expectations as a government-led construction boom and an extended rebound in the farm sector took some of the sting off a peso currency wallowing at 11-year lows.

The Southeast Asian nation is the second-fastest growing economy in Asia after China, with growth in the June quarter boosted by higher government spending and a stellar performance in the agriculture sector.

Gross domestic product rose 6.5 per cent in the second quarter from a year earlier, the national statistics agency said on Thursday (Aug 17), picking up from the 6.4 per cent pace in the first quarter, and above the 6.2 per cent forecast in a Reuters poll.

On a quarter-on-quarter basis, GDP expanded 1.7 per cent, above the 1.6 per cent growth projected in a Reuters poll, and faster than the previous quarter's upwardly revised 1.3 per cent.

"We are well on track to meeting our full-year target growth of 6.5-7.5 per cent," Economic Planning Secretary Ernesto Pernia told reporters at a briefing.

Like its regional peers, the Philippines benefited from an improvement in global demand, with exports up nearly 14 per cent in the six months to June.

Household consumption grew at slightly faster annual pace of 5.9 per cent in the second quarter compared with 5.8 percent in the first, while government spending jumped 7.1 per cent in a dramatic rise from the revised 0.1 per cent gain in the March quarter.

The peso was steady after the GDP report, though markets remain focused on the currency's outlook following a sharp slide.

Policymakers have sought to soothe frayed nerves in the foreign exchange market after the peso hit an 11-year low, saying currency movements do not reflect the underlying strength of the local economy.

A construction boom in the Philippines has contributed to the peso weakening amid a recent surge in capital goods imports.

Indeed, Manila aims to lift growth to as much as 7.5 per cent this year, from 6.9 per cent in 2016, as President Rodrigo Duterte's administration prepares for a six-year, US$180 billion spending spree on infrastructure.

The big spending plan to repair creaking infrastructure and build new roads, railways and airports form part of an ambitious effort by Duterte to boost growth in the US$290 billion consumption-reliant economy to around the 8 per cent level.

"We are optimistic that the accelerated state spending and project implementation would keep the Philippines in the club of Asia's fastest-growing economies," Finance Secretary Carlos Dominguez said in a statement.