Philippine economy grows at fastest pace since 1988, but Covid clouds outlook

Philippine economy grows at fastest pace since 1988, but Covid clouds outlook

A government worker assists people queueing to get Moderna Covid-19 vaccine in a school turned into a vaccination site that operates 24/7, in Manila, Philippines, n Monday. (Reuters photo)
A government worker assists people queueing to get Moderna Covid-19 vaccine in a school turned into a vaccination site that operates 24/7, in Manila, Philippines, n Monday. (Reuters photo)

MANILA: The Philippine economy exited a pandemic-induced recession with its fastest year-on-year growth in over three decades, but tighter Covid-19 curbs could hamper the recovery and boost expectations monetary policy will remain accommodative for the rest of 2021.

Gross domestic product (GDP) rose 11.8% in the June quarter from a Covid-driven slump a year earlier, posting the biggest year-on-year expansion since the fourth quarter of 1988, as domestic demand improved, the statistics agency said on Tuesday.

The economy returned to year-on-year growth after five consecutive quarters of contraction.

Economists in a Reuters poll had expected the economy to expand 10% year-on-year in the second quarter, after contracting a record 17% in the same period last year and shrinking a revised 3.9% year-on-year in the first three months of 2021.

The figures come ahead of the Bangko Sentral ng Pilipinas' (BSP) policy review on Thursday, where it is widely expected to keep the policy rate at a record low of 2.0%.

"The robust performance is driven by more than just base effects. It is the result of a better balance between addressing Covid-19 and the need to restore jobs and incomes of the people," said Socioeconomic Planning Secretary Karl Chua.

The economy, however, contracted a seasonally adjusted 1.3% in the April-June period, after growing 0.3% in the previous quarter.

Household consumption grew 7.2% year-on-year, after four straight quarters of decline, but government spending contracted 4.9% after a 16.1% rise in the March quarter.

The industrial and services sectors grew 20.8% and 9.6%, respectively, while agriculture, forestry, and fishing shrank 0.1%.

But there are growing concerns that the nascent recovery could be derailed as the government has tightened coronavirus restrictions to contain the spread of the highly infectious Delta Covid-19 variant.

BSP Governor Benjamin Diokno on Monday reiterated the BSP's resolve to maintain its accommodative monetary policy for as long as needed to ensure a sustainable recovery.

The economy should grow 8.2% in the second half of the year to hit the low end of the government's full-year growth target of 6.0%-7.0%, said Philippine Statistics Authority chief Dennis Mapa.

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