MANILA, Philippines ? (UPDATE3) The Philippine economy grew by 4.6 percent in 2008, down from a 30-year high of 7.2 percent the previous year, the government said Thursday.

Gross domestic product (GDP) growth in the last quarter of the year was 4.5 percent, above market expectations.

The government had said it expected growth of 3.6-4.4 percent in the fourth quarter from a year before. It had expected the financial crisis to depress 2008 growth to between 4.2-4.5 percent.

The government also Thursday said it had revised growth in the third quarter to an annual 5.0 percent against the original 4.6 percent reported in November.

President Gloria Macapagal-Arroyo lauded the stronger-than-expected growth figures.

"Two-thirds of the world is in recession but we should all be proud that our country is growing at 6.0 percent GNP (gross national product) and 4.6 percent GDP (gross domestic product) in 2008. Congratulations," she said in a speech during a Lakas party meeting at Clark Field, Pampanga.

"We meet at a crucial moment in history. The global financial turmoil has spread and jeopardized the well-being of people across the globe," she said.
Looking ahead, the government said its 3.7 to 4.7 percent economic growth target this year was a "welcome challenge," and the economy would likely weather the impact of the global financial crisis.

"As the government implements fiscal and monetary policy to mitigate the impact of the crisis, our economy is expected to remain resilient and prepared for the eventual economic rebound," Socio-economic Planning Secretary Ralph Recto told reporters.

"It's a welcome challenge," Recto said of the growth target.

He said construction will be the key driver of growth.

"As the government implements fiscal and monetary policy to mitigate the impact of the crisis, our economy is expected to remain resilient and prepared for the eventual economic rebound," Recto said after the release of the data.

Vincent Tien You Tsui, economist at Standard Chartered Bank, said that although the economy slowed in the fourth quarter, and may slow further in 2009, the Philippines could escape outright recession.

"Overall, the Philippines will be better insulated from the collapse of external demand compared with other Asian economies" as exports account for just 32 percent of GDP.

Luz Lorenzo, an economist and market strategist at ATR-KimEng Securities, believes the economy got a strong boost from private consumption because of lower commodity prices and increased government spending.