By Mikhail Flores and Karen Lema
MANILA (Reuters) -The Philippine economy grew at its fastest annual pace in a year in the second quarter, buoyed by a sharp rebound in agriculture and resilient domestic consumption, offering the central bank greater flexibility in its monetary policy stance.
Gross domestic product expanded by 5.5% year-on-year in the April-June period. That surpassed the 5.4% median forecast in a Reuters poll, which is also the rate at which the economy grew in the first quarter.
“With this performance, we maintain our place among the fastest-growing economies in emerging Asia,” Economic Planning Secretary Arsenio Balisacan said during a press briefing.
On a seasonally-adjusted basis, the economy grew by 1.5% quarter-on-quarter, outpacing the 1.3% forecast in a Reuters poll of economists.
A key contributor to the second-quarter performance was the agriculture sector, which expanded 7%, faster than the previous quarter’s 2.2% growth, according to the statistics agency.
Slowing inflation also helped support household consumption, which rose 5.5% year-on-year in the second quarter, the fastest pace since the first quarter of 2023.
With first-half growth already at 5.4%, reaching the lower end of the government’s full-year growth target of 5.5% to 6.5% is “very feasible,” Balisacan said, citing slowing inflation and the effects of previous interest rate adjustments.
Bangko Sentral ng Pilipinas Governor Eli Remolona told Reuters last week the central bank was on track to slash its key interest rate, currently at a two-and-a-half-year low of 5.25%, two more times this year, but the timing will depend on the outlook for growth and inflation.
Improved trade conditions further support the outlook, Balisacan said, noting that the recent reduction in U.S. tariffs on Philippine goods, from a threatened 20% to 19%, removed a layer of external uncertainty.
He also allayed concerns over a U.S. plan to impose 100% tariff on semiconductor chips imported from countries not producing in America, which an industry leader had described as “devastating” for the country earlier in the day.
“I don’t expect that to be adverse because … the value added of (the Philippines’) semiconductors and electronics is not that high,” Balisacan said.
(Reporting by Mikhail Flores and Karen Lema; Editing by Martin Petty and Ronojoy Mazumdar)
