Philippines GDP growth beats forecast, but tariff worries weigh
MANILA: The Philippine economy grew slightly faster than forecast in the second quarter on the back of strong farm output and consumption, even as trade and industrial expansion slowed amid uncertainty over the impact of US tariffs.
Gross domestic product expanded 5.5% in the April to June period from a year earlier, the statistics agency said Thursday (Aug 7). That's marginally above the median estimate of 5.4% in a Bloomberg News survey.
Farm output - which has been a drag on the economy in recent years - posted its fastest growth in 14 years, as rice and corn harvest improved. Consumption, which makes up more than 70% of the nation's output, and the services sector rebounded amid tame inflation.
"Our strategic, sustained and coordinated efforts to manage inflation are clearly making an impact,' Economic Planning Secretary Arsenio Balisacan said at a briefing.
"The Philippine economy continues to show resilience and stability, even as global challenges persist and fuel uncertainty across many fronts.'
The Philippine peso rose 0.3% to 57.33 against the dollar after the release of the data. The benchmark stock index edged lower.
The nation managed to grow faster than most peers in the region, supported by easing price pressures. A series of interest-rate cuts starting last year also fuelled the expansion, with Governor Eli Remolona saying the central bank could continue easing in the coming months.
Still, there are signs that global trade and economic uncertainty from US tariffs have started to affect the Philippine economy, with growth in industry, investment and exports all slowing last quarter.
Officials have played down the economic impact of US President Donald Trump's planned tariffs, citing the country's low reliance on exports.
The US will impose a 19% tariff on Philippine goods, on par with most of its neighbours, starting later on Thursday.
President Ferdinand Marcos Jr now seeks to grow the economy by 5.5% to 6.5% this year, slashed from a previous goal of 6%-8%.
Central bank chief Remolona said on Tuesday that the monetary authority has room to continue its easing cycle next year after possibly two more quarter-point cuts for the rest of 2025.
GDP has to expand by 5.6% in the second half of the year to meet the lower end of the government's full-year goal, Balisacan said.
Apart from low inflation, a tight labour market also helped quicken growth in consumer spending, defying the uncertainty of US tariffs, according to Tamara Henderson, economist at Bloomberg Economics.
"Even so, we think the weaker outlook from the looming global trade shock - alongside already muted inflation - will persuade Bangko Sentral ng Pilipinas to loosen policy further,' she said.
Henderson expects the BSP to cut its key interest rate by 25 basis points at its next meeting on Aug 28. - Bloomberg
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