Philippines Lowers 2008 Growth Target a Second Time

By Karl Lester M. Yap

Aug. 20 (Bloomberg) -- The Philippine government lowered its 2008 economic-growth target for a second time this year as rising oil prices fueled inflation and damped consumer spending.

Gross domestic product may expand 5.5 percent to 6.4 percent this year, National Economic Development Authority Deputy Director-General Augusto Santos said in a telephone interview from Manila today.

``The government will have to do more pump priming,'' said Joric Nazario, treasurer at Philippine Veterans Bank in Manila. ``The central bank has a bigger problem. The choice is to increase rates to fight inflation or to lower to prop up growth.''

Asian governments are battling accelerating inflation, which is threatening to deepen an economic slowdown brought on by falling demand from the U.S., the region's largest export market. Record oil and rice prices have stoked inflation in the Philippines to the fastest pace in more than 16 years, cooling consumer spending that makes up 70 percent of the economy.

The peso declined 0.3 percent to 45.615 against the dollar at 10 a.m. in Manila, according to Tullett Prebon Plc, rounding out a 2.9 percent drop since Aug. 11, the last trading day it rose. It had gained as much as 0.08 percent before Santos's comment.

``It's mainly because of the economic slowdown brought about by high oil prices,'' Santos said of the new growth forecast.

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. The economy expanded 5.2 percent in the first quarter. The government will release second-quarter economic data next week.

To contact the reporter for this story: Karl Lester M. Yap in Manila at o kyap5@bloomberg.net.