Philippines outperforms the region with 7.1% growth

MANILA - The Philippine economy grew by 7.1% y/y in Q3, ahead of market expectations. Despite the weak export outlook, domestic demand still remained robust. Growth was driven by stronger manufacturing sector performance (Q3: 6.9% y/y versus Q2:6.2% y/y) as foreshadowed by the strength in recent industrial production prints.

The agricultural sector also posted higher growth of 2.9% y/y in Q3, reversing from a 2.1% y/y contraction in Q2.
In a research note, ANZ Bank says that looking ahead into Q4, sustained strong fiscal spending will continue to be supportive of growth.
“For the upcoming 2017 Budget, the Duterte Government proposes to increase the deficit to 3.0% of GDP, from 2.0% in 2016 and less than 1.0% in 2015.
This is expected to further propel consumption and investment demand. We are pencilling in GDP growth of  6.4% y/y in 2016 and 6.0% in 2017.”
ANZ says it expects the Philippines central bank, BSP, to be the first in the region to tighten its policy tools by Q3 2017.
“The forthcoming boost to infrastructure spending will likely keep domestic demand strong amid changes in the external environment. Meanwhile, the central bank has more time to facilitate the gradual migration of excess liquidity to its new term deposit facility.” www. Live.anz.com  (ATI).