The Philippine economy picked up more than expected in the third quarter, as strong domestic demand kept it relatively insulated from the global downturn, reducing the odds of an interest rate cut in December.
A sharp jump in third-quarter farm output and a late rebound in exports also contributed to the economy's 1.3 percent expansion in the July-September quarter from April-June, three times as fast as economists had predicted.
Like many of its Southeast Asian neighbors, robust domestic consumption and higher public spending have helped cushion the Philippine economy from the worst of the global slowdown, while manageable inflation has allowed Philippine authorities to keep interest rates accommodative for growth.
"We are well on our way to surpassing our growth target of 5 to 6 percent this year," Arsenio Balisacan, economic planning secretary, told reporters on Wednesday, referring to full-year growth.
The government's plan to raise spending further and forecast that inflation will remain manageable will ensure the economy retains much of its momentum in 2013, he added.
The Philippines, once known as "the sick man of Asia", is the only economy in the world which the International Monetary Fund believes will grow faster than earlier anticipated this year.
The IMF earlier this month raised its 2012 growth outlook for the country to more than 5 percent from its October forecast of 4.8 percent, citing its sound fiscal and monetary policies.
Remittances a Major Growth Driver
The government had targeted a faster growth rate of 5 to 6 percent this year compared with 3.9 percent in 2011, banking on domestic demand and higher state spending to offset weak global demand for the country's exports.
Economists polled by Reuters had forecast the economy would grow 0.4 percent in July-September from the previous quarter on a seasonally adjusted basis, picking up from 0.2 percent originally reported in April-June.
But revised data on Wednesday showed second-quarter growth was a far stronger 1.2 percent, indicating the economy carried much more momentum into the summer than first thought.
From a year earlier, the economy grew 7.1 percent in the third quarter, not far behind China's 7.4 percent and better than Indonesia, Southeast Asia's largest economy, which expanded 6.2 percent. Malaysia reported annual growth of 5.2 percent and Thailand 3.0 percent.
Domestic consumption remained firm, supported by remittances from Filipinos abroad.
To cushion the economy from the global downdraft, the central bank has cut its key policy rate by a total of 100 basis points so far this year to a record low of 3.5 percent.
Last week, the central bank released data showing businesses were more confident in the fourth quarter than in the third given expectations of an increase in business activity and demand, low inflation and interest rates, and favorable macroeconomic conditions.
The central bank's next policy move is still a guessing game, with the strong third-quarter growth likely to argue against a rate cut at its next meeting on Dec. 13, while at the same time raising concerns about a possible resurgence in price pressures next year.
However, the continued rise of the peso <PHP=> against the dollar may warrant further easing.
The peso is Asia's best performing currency so far this year, up more than 7 percent against the U.S. dollar on strong foreign inflows into Philippine stocks and bonds, fueled by forecasts of sustained and resilient domestic growth.
A recent Reuters poll showed further gains in the currency were expected.