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Economy

Philippine GDP grows at slowest annual pace in 8 years

Strong final quarter expansion of 6.4% fails to push growth to 2019 target

Consumer spending during the holiday season spurred growth in the fourth quarter but full-year results were disappointing, despite more government spending and lower interest rates.   © Reuters

MANILA -- The Philippine economy grew at its slowest pace in eight years in 2019 as the country grappled with delayed passage of the budget and fallout from the U.S.-China trade war.

Gross domestic product in the October-December quarter rose to 6.4%, but failed to push growth to the government's downgraded annual target of 6%, according to a report by the Philippine Statistics Authority released on Thursday.

Last quarter's data brought the full-year figure to 5.9%, the slowest annual expansion since 2011, when the economy grew 3.7%. The economy expanded 6.2% in 2018.

President Rodrigo Duterte's aggressive infrastructure drive since 2016 has helped fuel growth in recent years. But his warring congressional allies, who wrangled over funding allocations, led to a four-month delay in passing the national budget, slowing state infrastructure projects and delaying civil servants' salary increases.

Amid delayed outlays, growth stood at 5.6% and 5.5% in the first and second quarters, respectively, prompting the government to boost spending and the central bank to slash interest rates by 75 basis points. But third-quarter data was revised to 6.0% from 6.2% on Wednesday, suggesting that the recovery was weaker than initially estimated.

"A full percentage point was lost because of the delay in passing the national budget," Socioeconomic Planning Secretary Ernesto Pernia said in a news conference.

The government passed this year's record budget on time, boosting hopes for achieving the 6.5% to 7.5% growth target for 2020.

Meanwhile, officials said Philippine exports were also hurt by weak external demand due to the U.S.-China trade war. "Demand for exports from other countries like the Philippines has also slowed," Pernia said.

Apart from a surge in public construction, the fourth-quarter expansion was also buoyed by consumer spending during the holiday season, driven partly largely by overseas remittances.

On the supply side, services rose 7.9% in the fourth quarter, the industrial sector climbed 5.4%, while agriculture grew just 1.5% as crop output barely rose and African swine fever killed tens of thousands of pigs.

At least one economist believes the sluggish growth should prompt a rate cut by the central bank next month.

"We continue to price in a rate cut ... in February, followed by further easing in May to help rekindle the now scuttled new Philippine growth story," said Nicholas Antonio Mapa, senior economist at ING Bank.

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