The Philippine economy rebounded with growth of 5.6 percent in the second quarter, defying a regional slowdown thanks to robust government spending, but faltering exports and deepening economic woes in China tempered the outlook.
While annual growth was the third-fastest in the region after China and Vietnam, and ahead of the 5.0 percent rate in the first quarter, the El Nino dry weather phenomenon posed a major downside risk for the Philippines, economic planning Secretary Arsenio Balisacan said.
A rebound in state infrastructure spending helped the economy grow 1.8 percent in April-June from the previous three months, slightly below the 2.0 percent forecast in a Reuters poll. Weak government spending has been blamed for declining growth in 2014 and in the first quarter of 2015.
Unlike many of its Asian peers, Southeast Asia's fifth-largest economy has remained resilient in the face of sputtering global demand, supported by strong domestic consumption, which continued to be underpinned by remittances and low inflation.
"As one of the countries with a respectable growth compared to other emerging Asian economies, the Philippines remains an attractive market and investment destination," Balisacan told a media briefing on Thursday.
But a worsening El Nino weather pattern, a slowdown in China and turmoil in its own markets and globally would likely make it more difficult for the government to meet its 7-8 percent growth target this year. Balisacan said the government was likely to cut the growth target, with a realistic goal around 6.0 to 6.5 percent.
Economists have penciled in 6 percent growth this year. Emilio Neri, economist at the Bank of the Philippine Islands, said: "Most critical is how the government delivers on its planned outlays."
Following Thursday's GDP data, the Philippine central bank governor Amando Tetangco said there was no reason to change monetary policy given domestic demand remained solid.
The downturn in China, the Philippines' third-biggest export market, has hit many Asian economies reliant on shipments to the world's second-biggest economy.
Indonesia's economic growth in the second quarter, for instance, slowed to its weakest since 2009, and the economy of tiny, much more export-dependent Singapore contracted on an annualised basis.
But Philippine officials had said earlier Beijing's move to devalue the yuan may benefit global growth should it lead to higher Chinese exports in the near term.
"Considering you have all these global headwinds, you have election uncertainty and poor weather conditions, this (GDP number) is already an acceptable figure," said Bank of the Philippine Islands' Neri.