Karen Lema and Neil Jerome Morales

MANILA, (Reuters) – The Philippines saw a slowdown in their annual economic growth due to the renewed COVID-19 sanctions. It gave the central bank more reason for keeping interest rates low for a time.

The Southeast Asian economy was able to recover from the five quarters of contraction it experienced in the three months up to June. However, momentum lost in September quarter when the government tightened restrictions to limit a rise in coronavirus infections.

The July-September period’s gross domestic product grew by 7.1% compared to a year ago, according to the statistics agency. This was slower than the upwardly revised 12% growth in the prior quarter but higher than the forecast of 4.8% in a Reuters poll.

The economy experienced 3.8% growth in September on a quarter to quarter basis.

In the third quarter, household consumption increased 7.1% from one year ago, slightly slower than 7.3% in previous quarters. Meanwhile, government spending rose 13.6% following a 4.2% dip in April-June.

Following the August reimpositions of tight lockdown measures in the capital city and in nearby provinces, the unemployment rate rose to 8.9% in September.

Sector-wise, services and industry saw growths of 7.9% to 8.2% respectively. However, agriculture, fishing and forestry experienced a 1.7% drop partly due the impact of African swine disease outbreaks and bad weather.

Karl Kendrick Chua Socioeconomic Planning Secretary said that, despite third-quarter slowdowns, this year’s growth could surpass the target of 4.0%-5.0%. The decline in COVID-19 patients and the rise in vaccination rates allowed for an additional reopening.

Economists believe that the central bank will maintain its benchmark rate of 2.0% at the end of the year, despite slower inflation.