Philippines eludes slump in good Q2

       The Philippines economy dodged the recession that engulfed much of Asia and enjoyed its strongest performance in more than two years in the second quarter, prompting the central bank to say it may change its policy.
       Second-quarter gross domestic product growth at a seasonally adjusted 2.4% from the first quarter was the highest since 2.4% in the first three months of 2007, the state socioeconomic planning agency said yesterday, and beat market estimates.
       The government's stimulus package - investments in infrastructure and social services - lifted economic output in the second quarter, offsetting stubbornly weak exports.
       "Growth came mainly from investments in construction, government consumption expenditure, and household spending," said Romulo Virola,head of the government's statistics board.
       Analysts had expected the Southeast Asian economy to expand by a seasonally adjusted 2.0% in the second quarter and to reverse the previous quarter's revised 2.1% contraction, according to the median of a Reuters poll.
       The data justified the central bank's decision last week to end an eightmonth easing cycle, Diwa Guinigundo,a central bank deputy governor, told Reuters by text message.
       "This clearly shows stronger signs of economic recovery," he said."The recent decision to pause was correct,from which perspective, a possible shift in monetary policy may be decided."
       The central bank last week kept its interest rate at a record low of 4.0% to join its Asian peers in assessing the impact of accommodative policies. It has cut rates by two percentage points in eight months.
       Analysts said the government would likely sustain spending and the central bank might keep rates steady for the rest of the year.
       "Fiscal policies will very likely have to remain in expansionary mode," Vishnu Varathan, economist at Forecast."The BSP (central bank) is likely to keep rates steady at current record lows even with this growth uptick."
       On an annual basis, second-quarter GDP climbed 1.5%, also higher than market estimates, and the government said it was likely to breach its full-year growth target this year and next.
       The government had expected second-quarter growth to come in between a 0.1% contraction and 0.9%expansion from a year earlier.
       Government spending climbed 9.1%in the second quarter from a year earlier,twice as fast as the 4.5% expansion in the first three months.
       Private spending grew 2.2% in April to June from a year earlier, higher than the 1.3% gain in the first quarter. Consumption fuels about three-fourths of the economy.
       The Philippines is one of few countries in Asia to escape recession amid the worst downturn in decades.Export-led economies such as Japan,Hong Kong, Singapore and Taiwan tumbled as demand from Western markets collapsed.
       Japan, Hong Kong, Singapore,Malaysia and Thailand pulled out of their downturns in the second quarter but consumer demand remains weak,fueling worries about the sustainability of a global recovery.
       Economists also fear that newfound growth could sputter as the impact of government stimulus spending wanes.