© Reuters. FILE PHOTO-Workers remove roots from onions before they are sold at a public market in Quezon City, Metro Manila, Philippines, February 9, 2023. REUTERS/Eloisa Lopez/File Photo
By Neil Jerome Morales and Enrico Dela Cruz
MANILA (Reuters) -The Philippine economy grew at its slowest pace in nearly 12 years in the second quarter as high inflation and interest rates hurt consumer demand, reducing pressure on the central bank to tighten monetary policy further.
Gross domestic product (GDP) rose 4.3% in the April-June quarter from the same period last year, the weakest growth since 2011, official data on Thursday showed, and much lower than the 6.0% expansion forecast in a Reuters poll.
A contraction in government spending after last year’s election-driven increase also dragged down GDP growth, which lost further momentum after the previous quarter’s 6.4% pace and the December quarter’s 7.1% growth rate.
On a quarter-on-quarter basis, the economic picture looked more dim after the GDP contracted 0.9% in the second quarter, the first decline in 12 quarters. That compared with the downwardly revised 1.0% expansion in the March quarter and 0.5% growth forecast of economists.
The country’s economic ministers also blamed high borrowing costs and commodity prices for the lacklustre growth, which they said outweighed the impact of tourism spending and investments.
Growth in the June quarter brought first half expansion to 5.3%, below the government’s 6.0%-7.0% target for the year. Even so, Economic Planning Secretary Arsenio Balisacan said the full-year target was still attainable.
“We firmly believe that the prospects of the Philippine economy remain strong and positive,” the economic ministers said in a statement read by Balisacan at a press conference.
ING economist Nicholas Mapa said the central bank, which will meet on Aug. 17 to review policy, “will need to consider a pause” to support growth.
The Bangko Sentral ng Pilipinas (BSP) has kept interest rates steady at 6.25% at its last two meetings after nine rate hikes to curb consumer price pressures.
The BSP’s combined 425 basis points of rate increases since May last year should bring inflation back to the 2%-4% target by the fourth quarter, Governor Eli Remolona told lawmakers on Thursday.
That should give authorities “the cause for a prudent pause” in its tightening cycle, he said.
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