Philippines' economy expands to fastest pace during the second quarter

The Philippines economy released today the gross domestic product for the second quarter of the year, showing an unexpected expansion, which is the fastest pace in three years, as consumer and the government spending encountered weaker farm output. This expansion will pressure the central bank to increase the interest rate to defeat the rise in inflation.

The Philippines economy released its GDP reading for the year ending in June, where the economy expanded by 7.9% compared with the previous 7.3% that got revised to 7.8%, while expectations referred to 6.3%.

Philippines's GDP expanded by 1.3% on the quarter, compared with previous of 3% revised to 3.8%, while expectations were pointing to 1.6%.

On the other side, the Asian policy makers’ strategy aims to curb inflation and contain asset bubble against the government efforts that helped to support the nation’s recovery. Meanwhile, the Central Bank of Philippine will release its decision about the benchmark rate, while the expectations indicate that the bank will keep it unchanged at 4% to support domestic demand.

Analysts indicates that there is a very low risk of the central bank to increase the borrowing costs this year as the economy growth is still not threatened by inflation, where growth factories such as inventory restocking and exports have a big chance of wearing off during the 2nd quarter.

As for, inflation which held at a seven-month low during July, while the central bank noted that it expects price gains to be within its targets during this year and in upcoming period.

Mrs. Amador, the deputy governor of the Central Bank of Philippines, raised inflation expectations this year to 5.1%, compared with the previous expectations of 4.64%, adding that the current year's inflation levels may range between 5.5% and 6.0% during June and July, while she says "the risk balance" to inflation "tends" to the upside.

Faltering global recovery have a negative effect on the government strategy that it aims to attract overseas investment and create new job vacancies. 

Philippines monetary policy plans to raise the government spending to a record next year, and boost incomes in the nation, to expand the economy by 7.0% to 8.0% annually in 2011.