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News Analysis: Philippine stocks rebound as country's GDP grows by only 5.6 pct in second quarter

Xinhua, August 29, 2015 Adjust font size:

Philippine stocks continued to rally for the fourth straight day since the freefall last Monday as regional markets reacted positively to the better-than-expected U. S. economic growth in the second quarter.

On Friday, the Philippine Stock Exchange index (PSEi) gained 76. 72 points or 1.09 percent to close at 7,098.81.

On Monday's trading, the PSEi fell 487.97 points, the biggest decline in a single day in absolute terms, to close at 6,791.01.

On the same day, the Philippine peso, the local currency, also reached a low of 46.845 pesos to 1 U.S. dollar after opening at 46. 70 pesos to 1 U.S. dollar. This was the weakest exchange rate of the Philippine peso in five years.

Friday's gains were led by the mining/oil counter which surged by 5.16 percent while the industrial, holding firm and property counters, rose by more than 1 percent.

On Thursday or a day before, the National Economic and Development Authority (NEDA), the country's highest economic policy-making body, announced that the Philippine economy expanded by 5.6 percent in the second quarter, faster than the 5 percent growth in the first quarter, but below the government's 2015 target of 7 percent to 8 percent.

In a media briefing, NEDA Director General Arsenio Balisacan admitted that with the gross domestic product (GDP) growth averaging 5.3 percent in the first half, even the low-end of the full-year growth target was now"quite challenging"to meet.

Balisacan said the realistic growth could be 6 percent to 6.5 percent for the whole year. "We are not projecting right now, (but) the realistic scenario is 6 percent to 6.5 percent. The 7 to 8 (percent target) for full year is already quite challenging,"he said.

The gross national income, which factors in remittances from other countries, grew 5 percent in the second quarter and 4.6 percent in the first half. The slowdown in workers' deployment overseas pulled down the growth of net primary income from the rest of the world to 2.2 percent from 7.9 percent last year, data from the Philippine Statistics Office showed.

Data also showed that services and industry grew 6.2 percent and 6.1 percent, respectively in the second quarter while the agriculture sector declined 0.5 percent.

Makati Business Club executive director Peter Angelo Perfecto said the second quarter GDP growth of 5.6 percent was in the range of most economists'projections.

Perfecto said that with continued public spending, especially in the context of the coming 2016 elections and stronger holiday spending and OFW remittances, the country will achieve a full year growth of 6 percent to 6.5 percent, which is now the government's target.

Philippine Export Federation president Jose Ortiz-Luis also said the economy is expected to recover in the second half, on higher government spending in the run-up to the May 2016 election.

Ortiz-Luis said that based on recent government data, growth going to the level of 7 percent is now unrealistic although" growth is still possible."

But Finance Secretary Cesar Purisima said that despite the relatively slower growth in the second quarter, the Philippines still emerged as the third fastest growing economy among major Asian countries. He said that this was achieved"despite heightened concerns on the continuing lackluster performance of the global economy."

On regional stocks, analysts said that aside from the positive news on the U.S. economy, reports that China's state pension funds could invest over 300 billion U.S. dollars in the markets have encouraged further rises on the regional bourses.

On Friday, the People's Bank of China injected 60 billion yuan (9.39 billion U.S. dollars) into the country's banking system to help ease short-term liquidity needs, according to wire reports.

Chinese officials continued to seek to cool anxiety about a slowdown in the nation's economy.

A senior official from the People's Bank of China was quoted by a wire report as saying that the decline on world markets earlier this week were not caused by Beijing's recent devaluation of its currency, but were rather the result of worries that the U. S. might raise interest rates. Endi