The Philippine economy unexpectedly slowed for a fifth straight quarter, raising questions about the central bank's rate-hike cycle and adding pressure on President Ferdinand Marcos Jr.
Gross domestic product expanded 2.1% in the three months to September from a year earlier, the statistics agency said Monday. That compares to 2.4% in the second quarter and was a full percentage point below the median estimate of 3.1% in a Bloomberg News survey. Agricultural output fell 4.8% in the third quarter, and services growth continued to slow. Typhoons battered the climate-vulnerable nation, with El Niño further clouding the outlook. The peso fell 0.3% and the benchmark stock index dropped as much as 0.7% after the release. Growth was less than half the pace seen in Indonesia or Malaysia, and less than a quarter that of Vietnam.
The data underscore the damage from the US-Iran war, which has driven up crude oil prices and inflation, forcing the central bank to hike interest rates. Higher living costs and unresolved government corruption scandals have weakened consumer and business confidence. High food and energy prices constrained spending, while tighter financial conditions weighed on investment, which remained in contraction. Inflation accelerated to 7.8% in October, the fastest pace in almost four years, and the central bank raised rates by a jumbo 50 basis points that month.
Economic Planning Secretary Arsenio Balisacan did not call for a pause in rate hikes, noting the central bank is trying to cool price gains. He said achieving the 2026 growth target of 3.5% to 4.5% is "very challenging at this point," but hoped fourth-quarter performance would be better.
The central bank must now weigh a weak economy against surging prices and a peso that has dropped almost 7%, making it Asia's second-worst-performing currency this year. Bank of the Philippine Islands lead economist Emilio Neri Jr. said a smaller December hike is possible due to growth concerns, which could put more pressure on the peso. Marcos also faces pressure to support an economy heavily dependent on imported Middle East energy, while the graft scandal remains unresolved.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing