Philippines back to 6% growth

Last week's policy meeting reemphasised that Bangko Sentral ng Pilipinas is unlikely to loosen its monetary policy stance anytime soon. While CPI inflation is set to miss the official target this year, GDP growth momentum remains pretty strong. 3Q15 GDP data next week is likely to show that growth has returned to the 6% territory in the period. 

Even if low base effects might have played a part, it is no surprise that domestic demand remains robust. The government plays quite a significant role on this front. Fiscal spending accelerated in 3Q15, growing close to 20% (YoY), bringing the year-to-date growth to 12%. After two consecutive years of seeing 5% growth, fiscal spending is finally back to the double-digit territory. 

There are some concerns if the 2016 elections may weigh on the pace of fiscal spending ahead. While this is clearly something to monitor closely, it is also important to note that private sector growth remains resilient. Private consumption growth continues to trend circa 5.5-6.0% and has constantly contributed 4%-pt to overall GDP growth in the past 5 years. Monthly data, including retail sales, continues to paint a strong outlook into next year.