* Q3 GDP grows 6.2% y/y, beats forecasts
* Economic pick-up driven by higher government spending
* Low end of 2019 GDP target achievable - econ planning
secretary
(Adds more details, comments)
By Karen Lema and Neil Jerome Morales
MANILA, Nov 7 (Reuters) - The Philippine economy grew faster
than expected in the third quarter fuelled by buoyant government
spending and domestic demand, lowering the chances of more
policy easing this year.
Economists expect the growth rebound will give the central
bank, which meets next week to review rates, more time to assess
the impact of its previous cuts to the policy rate and banks'
reserve requirements.
Gross domestic product in the July-September quarter grew
6.2% from a year earlier, the statistics agency said on
Thursday, exceeding the 6.0% median forecast in a Reuters poll,
and the prior quarter's 5.5% growth.
On a seasonally-adjusted basis, the economy grew 1.6% in the
third quarter.
The Philippines remains one of the fastest-growing economies
in Asia, but rising uncertainties, including ongoing U.S.-Sino
trade tensions were major risks to the country's growth outlook.
Economic Planning Secretary Ernesto Pernia told a news
conference that meeting the bottom end of this year's 6%-7%
official growth target was achievable as the government plans to
speed up key infrastructure projects this year.
The government's efforts to catch up with its expenditure
plans, which were delayed by the approval of this year's budget,
have paid off with public spending up 9.6% in the third quarter
from last year, compared with 7.3% in the previous three months.
Slowing inflation, which has allowed the central bank to
reverse some of last year's policy tightening, should also give
domestic demand a boost and lift economic growth in the last
quarter of the year, Pernia said.
Manila's broader stock index .PSI and the Philippine peso
PHP= barely moved after the data.
CONSUMPTION, FARM OUTPUT
Domestic demand, which accounts for just under 60% of the
economy, grew 5.9% in July-September from a year earlier, faster
than the previous quarter's 5.5%.
Also contributing to the surprisingly solid growth in the
third quarter was a strong rebound in farm output, which climbed
3.1% during the period, up from 0.8% in the prior quarter.
Pernia said the economy would need to expand by at least
6.7% in the final quarter to meet at least the bottom end of the
growth goal.
Exports struggled amid trade war risks with growth slowing
sharply to 0.2% in the third quarter from 4.8% in the June
quarter, while imports posted no growth during the period.
Capital formation also shrank in the third quarter although
at a slower pace of 2.1%, weighed down by the 9.1% contraction
in investments in durable equipment, which Pernia said should
reverse as lower borrowing costs encourage investments.
But Capital Economics Asia economist Alex Holmes is
sceptical the growth rebound can be sustained.
"We don't think Q3's strong figures mark the start of a
sustained rebound. On the plus side, consumption should continue
to grow at a decent rate, helped in part by a sharp slowdown in
inflation, which will have boosted consumers' purchasing power,"
Holmes said in a research note.
While Holmes believes there will be no more policy easing
this year, he expects the central bank will resume cutting
interest rates next year, possibly by another 50 basis points.
The central bank slashed its benchmark interest rate
PHCBIR=ECI thrice this year by a total of 75 basis points to
4.0% and reduced the reserve requirement ratio (RRR) by 400
basis points to 14%.
Bangko Sentral ng Pilipinas Governor Benjamin Diokno said
the central bank's policy stance is "appropriate" after the data
was released.
The central bank has two more policy meetings this year, one
on Nov. 14 and the next on Dec. 12.
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Philippine economy snapshot: http://tmsnrt.rs/2nZqDWx
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(
Editing by Jacqueline Wong)