ASEAN KEY DESTINATIONS
Philippine economy contracts in third quarter
The economy shrank a seasonally adjusted 0.5 percent in July to September from the second quarter - well below analysts' forecasts of 0.9 percent growth and second quarter growth of 1.4 percent. The contraction was the Philippines' first in six quarters, and followed data this week showing Thailand had slipped into a technical recession in the third quarter.
"Domestic demand weakened considerably, weighed by sluggish government spending," said Radhika Rao, economist at Forecast PTE, noting the new government had curtailed spending to set public books in order after a bloated first half budget deficit.
The economy has been supported by remittances from millions of overseas workers and strong growth in exports, but a moderation in growth had been expected as the impact of government pump-priming and election spending faded. The agriculture sector was also badly hit by drought this year. Philippine stocks gave up early gains to end down 0.7 percent.
The peso weakened to 44.12 in late morning trade after opening at 44.02.
After a strong finish to 2009 and start to 2010, Asian economies have lost momentum as export growth has slowed and the impact of government stimulus around the world fades.
Singapore's export-driven economy shrank 18.7 percent in the September quarter, and growth has slowed in China, South Korea, Taiwan and Indonesia. Figures on Thursday showed Japan's export growth slowed for the eighth consecutive month in October, raising the risk the economy could contract in the fourth quarter.
The Philippines is one of the few Asian countries not to have raised rates since the global financial crisis, and the central bank said the growth data confirmed its stance had been appropriate. "The inflation forecast remains favorable so we can maintain interest rates for some time," central bank governor Amando Tetangco told reporters.
In annual terms, growth slowed to 6.5 percent in the September quarter, weaker than market and government estimates, from an upwardly revised 8.2 percent in the second quarter.
Analysts polled by Reuters had expected 6.8 percent, and the government had forecast growth in a range of 6.7 to 7.7 percent.
"It shows the strong peso's impact on remittances. But overall, the full-year growth is still expected to be pretty strong at 6 to 7 percent despite a one quarter pullback," said Standard Chartered Bank economist Simon Wong.
The government has said the economy will grow faster than its target of 5 to 6 percent this year.
On Tuesday, a senior official said growth could be around 7 percent this year. The economy grew 7.1 percent in 2007, the fastest rate in over three decades. Soon after the government took office mid-year, officials said they were targeting growth of 7-8 percent in 2011 and beyond, but this week pointed to a budget assumption of 5 percent.
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