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Philippine Economy Expands Most Since 1988

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The Philippine economy grew at the fastest pace since 1988 in the second quarter driven by strong household spending, investment and exports, data published by the Philippine Statistics Authority showed on Tuesday.

Gross domestic product rebounded 11.8 percent year-on-year, in contrast to the 3.9 percent decline seen in the first quarter.

This was the biggest expansion since the fourth quarter of 1988, when GDP gained 12 percent. The annual growth exceeded economists' forecast of 10 percent and also marked the first growth in six quarters.

On a quarterly basis, GDP was down 1.3 percent.

The expenditure-side breakdown of GDP showed that household spending advanced 7.2 percent annually, while government spending dropped 4.9 percent.

Gross capital formation surged 75.5 percent. At the same time, exports and imports climbed 27 percent and 37.8 percent in the second quarter.

On the production-side, industry and services posted positive growth of 20.8 percent and 9.6 percent, respectively. On the other hand, agriculture, forestry, and fishing posted a contraction of 0.1 percent in the second quarter.

The Philippines' chances of a strong economic rebound from the contraction recorded in the second quarter are looking slim given the new surge in virus cases and the reimposition of containment measures, Alex Holmes, an economist at Capital Economics.

The government's 6-7 percent GDP growth forecast for the year now looks out of reach, the economist added.

The Philippine central bank is set to announce its monetary policy decision on August 12. The bank is expected to leave its key rates unchanged on Thursday.

The central bank will lower its policy rate in September, but an early cut at its Thursday meeting cannot be ruled out, Capital Economics' economist Holmes said.

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