By Mikhail Flores and Neil Jerome Morales
MANILA (Reuters) -The Philippine economy expanded slightly faster than expected in the second quarter, with government spending and investments offsetting "anaemic" consumption growth as inflation weighed on households.
Gross domestic product (GDP) grew 6.3% from the April-June quarter last year, the statistics agency said. A rate cut next week could further prop up spending for the remainder of the year, economists said.
The second-quarter expansion was the fastest since the 6.4% annual growth in the first quarter of 2023, beating the 6.2% estimate in a Reuters poll of economists and outpacing the upwardly revised 5.8% growth in the first three months of the year.
Consumer spending grew 4.6% in the period, accounting for two-thirds of output. Investments increased 11.5% while government spending expanded by 10.5%.
"The household final consumption expenditure continued to be a bit anaemic, the growth is not as strong as one would expect," Economic Planning Secretary Arsenio Balisacan told reporters.
Consumer spending declined 0.1% quarter-on-quarter due to lower sales in restaurants and hotels, government data showed.
First-half GDP growth averaged 6.0%, putting the economy on track to meet the full-year growth target of 6.0% to 7.0%, Balisacan said.
Economists said lower borrowing costs could help prop up growth.
"Loosening the monetary reins will help spur consumption and private investment, albeit with a bit of a lag," HSBC said in a research note. It projects the central bank will cut the policy rate by 25-basis points (bps) to 6.25% on Aug. 15 and another 25 bps later this year.
Michael Ricafort, an economist at Rizal Commercial Banking Corp in Manila, said monetary easing can start next week as long as inflation would remain within the central bank's inflation target in the coming months.
While higher-than-expected GDP growth gives room for the central bank to maintain its policy rate, monetary authorities can pursue an off-cycle rate cut when needed, said Ruben Carlo Asuncion, chief economist at Manila-based Union Bank.
On a seasonally adjusted basis, the economy grew 0.5% quarter-on-quarter, slower than the previous quarter's 1.3% growth and below the 0.9% forecast in a Reuters poll.
The GDP data followed an inflation report on Tuesday that showed consumer prices quickened at the fastest pace in nine months in July, prompting the central bank governor to say a rate cut at its next meeting on Aug. 15 would be "a little bit less likely."
The 4.4% inflation rate, which was above market expectations, was outside the central bank's 2.0% to 4.0% target range for the year. Annual inflation in June was 3.7%.
The economy also received a boost from a drop in unemployment rate, which stood at 3.1% in June, the lowest since December 2023, according to government data released on Wednesday.
But agriculture, forestry and fishing remained a weak spot in the second quarter, shrinking 2.3% from a year earlier due to a prolonged dry spell caused by the El Nino weather pattern.
(Reporting by Neil Jerome Morales and Mikhail Flores; Editing by John Mair, Jamie Freed and Sonali Paul)
