Economy update, 8.24.2009By Randell Tiongson on August 24th, 2009
Nose bleed alert!
As of 8.24.2009
1. Philippine rates kept steady
- As expected the Philippine central bank kept overnight rates unchanged at its policy meeting Thursday.
- COMMENT: This halts the easing cycle that has caused a 200 basis points cut since December.
- The CB is expected to keep a wait and see attitude regarding Philippine economic growth, due to come out this Thursday.
- The anticipated change in policy however does not deter any significant shift to fixed income investments.
- Rates remain low (SDA rates below 3%) enough to keep risk appetite high for equity investments.
2. Philippine GDP bottomed out in 2Q09; data due this Thursday
- According to NEDA, the Philippine economy continued to remain weak in the 2Q09.
- NEDA sees gross domestic product in the second quarter to have shrunk as much as 0.1% or expanded up to 0.9% from a year earlier.
- The economy expanded 0.4% in the first quarter from a year earlier.
- The government is set to release second-quarter GDP data on Aug. 27.
- Officials estimate that services sector is expected to have grown between 1.7% and 2.2% in the second quarter.
- Agriculture likely expanded between 0.4% and 1.4%.
- Industry however is projected to have contracted between 1.3% and 2.9%.
- However, the NEDA expects the economy to have bottomed out in the second quarter of 2009
- Economy will be driven by campaign spending ahead of the elections in May 2010.
- In 2007, election spending contributed around 0.34 percentage point to GDP growth.