Philippine Government Cuts Growth Forecast

The Philippine government cut its 2008 economic-growth forecast today for the second time this year as faster inflation hurt consumption, adding pressure on the government to boost spending on food and fuel subsidies to the poor. Gross domestic product is now expected to expand between 5.5 percent to 6.4 percent this year, down from an earlier forecast of as much as 6.6 percent, according to Economic Planning Undersecretary Augusto Santos.

Philippine stocks and the peso fell on concern the government may expand subsidies for the third of the 96 million population that lives on less than a $1 a day, widening the fiscal deficit.

President Gloria Arroyo in May pledged to boost investment and lift spending on rice and other subsidies to help Filipinos cope with soaring prices, abandoning her plan to balance the budget this year. Finance Secretary Gary Teves has said the government may post a 2008 deficit of 40 billion pesos to 75 billion pesos.



The $118 billion economy expanded 5.2 percent in the first three months of 2008, the slowest pace in six quarters. Inflation in the Philippines accelerated to 12.2 percent last month, the fastest pace in more than 16 years, crimping consumer spending that makes up 70 percent of the economy. The government first cut its growth target in May to 5.7 percent to 6.6 percent this year, from 6.3 percent to 7 percent previously. It will release second-quarter economic data next week.