Philippines gives China a run for its money

Country overtakes its neighbours as a safer investment option after prudent monetary policy.

The Philippines matched China's expansion in the second quarter, becoming the two fastest growing economies in Asia, as strong fundamentals, domestic spending and investments buttressed the South East Asian nation from regional fund outflows.

Its solid growth performance lifted the peso from nearly three-year lows and the stock market from nine-month lows, and better positions the Philippines to keep its favoured status among investors amid market volatility.

The country has overtaken neighbours such as Indonesia as a safer investment bet due to prudent management of fiscal and monetary policy. It secured "investment grade" from two ratings agencies this year.

But analysts warned that delays in public infrastructure projects could create uncertainty that might stall investments going forward as the Philippines seeks investors to bankroll construction of pivotal roads to railways.

Recent fund outflows from emerging markets due to the United States central bank tapering fears may also lead to destabilising capital flows in the economy, said Bernard Aw, analyst at Forecast in Singapore. But many analysts say the country's strong current account, adequate forex reserves and lower export dependence differentiates it from its regional peers.

The economy grew an annual 7.5 per cent in the second quarter. From the previous three months, GDP rose 1.4 pe rcent in the second quarter.

It was the slowest pace in a year and below the upwardly revised growth of 2.3 per cent in the March quarter.

Analysts expect the central bank to keep the policy rate on hold at a record low level of 3.5 per cent after the data.

The Philippines has managed to sustain annual growth of above 7 per cent for four quarters in a row, defying a slowdown in the region as it presses on with reforms.