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Philippines growth misses, storm damage to weigh

The Philippine economy grew at a slower-than-expected pace in the third quarter, and expansion in the current quarter is expected to be suppressed further in the wake of the devastating typhoon earlier this month.

Data on Thursday showed gross domestic product (GDP) growth coming in at 7 percent on year in the July-September quarter, slower than the 7.3 percent consensus forecast in a Reuters poll and worse than the 7.5 annual pace in the second quarter.

(Read more: Will typhoon Haiyan derail the Philippine economy?)

On a quarterly basis, the economy grew 1.1 percent, short of analysts' 1.4 percent target and slower than the 1.6 percent in previous quarter.

The government now expects the typhoon to shave off as much as 0.8 percentage point from fourth quarter GDP, Reuters reported Thursday quoting the economic planning agency.

Regardless, the 6-7 percent full-year growth estimate is still well within reach, said Finance Secretary Cesar Purisma, as rebuilding efforts will help to boost growth going forward.

"We believe that once we start reconstruction, this can amount to a form of fiscal stimulus. Just to put it into context, the area affected accounts for 12 percent of Philippine GDP," Purisma told CNBC following the release of the GDP figures.

"Moving forward, we believe the targets we've set are still attainable. Inflation right now is still below the edge of our policy range and we will continue to monitor it," he added.

The peso extended its losses following the data, while stock markets were higher in early trade.

(Read more: Typhoon was our 'Black Swan:' Philippine exchange COO)

Typhoon Haiyan, described as one of the worst storms ever, struck the country two weeks ago, killing thousands and displacing millions. The latest government estimates show $6 billion is needed in rebuilding and rehabilitation expenses.

According to Daniel Martin, Asia Economist at research consultancy Capital Economics, the impact of the super storm could even drag the economy into a quarterly contraction in the fourth quarter, but he expects that to be short term.

"If you look around, disasters that have hit the region before, what tends to happen the impact isn't all that great, not as large as you'd expect given the destruction you see. And also the rebound tends to be quite quick," Martin told CNBC.

A woman navigates a road filled with debris in Leyte, Philippines, an area devastated by Typhoon Haiyan.
Getty Images
A woman navigates a road filled with debris in Leyte, Philippines, an area devastated by Typhoon Haiyan.

In a note dissecting the data, Credit Suisse said it expects the massive reconstruction, coupled with an accommodative monetary policy and expectations of a stronger export cycle, to boost 2014 growth to 6.8 percent.

(Read more: Guess Which Country Is Growing Faster Than China)

The Philippines has one of the fastest growing economies in the world, beating even China in the first quarter. Last month Moody's lifted the country's sovereign rating to investment grade, the last of the three major credit rating agencies to do so, citing firm economic growth, improvements in the fiscal position and political stability.

Martin said the disaster is unlikely to cause a major change in investor sentiment towards the economy.

"Maybe there will be some reassessment the Philippines will be seen as more risky but then typhoons have hit the Philippines before anyway. Anyone who has been operating there would have known this as a risk in the first place," he said.

By CNBC's Li Anne Wong. Follow her on Twitter @LiAnneCNBC

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