KONTAN.CO.ID - MANILA. 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 and the Philippine peso barely moved after the data.

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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.

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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 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.

Editor: Wahyu T.Rahmawati