Manila: The domestic economy as measured by the Gross Domestic Product (GDP) picked up more steam in the third quarter, expanding by 7.1 percent from 6.0 percent in the second quarter, largely due to sustained strong local demand amid the downturn in the global economy.

The country's GDP expansion is the second strongest annual economic growth in Asia in the third quarter, next to the People's Republic of China which registered 7.4 percent.

This brings to 6.5 percent the average GDP growth for January-September 2012, which government officials and market players believed strengthened the possibility that the growth range target of 5-6 percent for 2012 within reach.

"We are well on our way to surpassing our growth target of 5 to 6 percent this year," Economic Planning Secretary Arsenio Balisacan said.

In his report, Balisacan said domestic consumption remained firm, supported by remittances from Filipinos abroad. Private spending, also, has been steadily inching up this year, with an annual climb of 6.2 percent in the third quarter, the fastest growth in three quarters.

Malacañang yesterday hailed the "resilience and resurgence" of the local economy despite a volatile global economy.

Presidential spokesman Edwin Lacierda expressed optimism that the government can exceed its growth target of 5 percent to 6 percent at the end of the year. "The Philippine economy grew 7.1 percent in the third quarter this year beating government targets and besting other Southeast Asian countries."

Finance Secretary Cesar V. Purisima admitted that the GDP growth was achieved in a very difficult global economic environment and despite the 2.2 percent decline in the mining sector.

"We welcome the third quarter GDP figures showing broad-based growth across all sectors, going beyond market expectations and placing us above most of our ASEAN (Association of Southeast Asian Nations) peers," said Purisima.

It, also, shows that the Philippines has more room for much faster economic expansion ahead as the country has yet to reach its full potentials. "Coupled with the multiple records set recently in our capital markets, the third-quarter GDP figures show that investor and consumer confidence in the Philippines is definitely on an upward momentum," he added.

Like many of its ASEAN neighbors, robust domestic consumption and higher government spending have helped cushion the local economy from the worst of the global slowdown, while manageable inflation has allowed government authorities to keep interest rates accommodative for growth.

Comparatively, Indonesian economy inched up by 6.2 percent; Malaysia, 5.2 percent; Vietnam, 4.7 percent; Thailand, 3.0 percent; and Singapore, 0.3 percent.

"This impressive expansion from 3.2% in the same quarter last year, places the country's 9-month growth rate at 6.5% and on track to surpass the 5-6% full year growth target set by the National Economic Development Authority," Lacierda said.

The GDP expansion was fueled by, among others, the robust growth in construction, jumping by 24.3 percent, the highest, in at least six quarters while public consumption expanded an annual 12 percent in the third quarter, almost double the rate in the second quarter.

Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco, Jr. said the authorities will carefully steer monetary policy to sustain strong growth and manage risks from capital inflows.

Policymakers meet for the last time this year on Dec. 13 and analysts expect the policy rate to be kept steady well into 2013. To recall, the monetary authorities has decided to cut its key policy rate by a total of 100 basis points so far this year to a record low of 3.5 percent inorder to cushion the local economy from the global downdraft.

However, the continued appreciation of the peso against the dollar may warrant policy action. The BSP has said it was revisiting foreign exchange liberalization measures to counter the rapid appreciation of the local currency.

Balisacan said upward pressures on the peso should ease next year as major infrastructure projects under the private-public partnership scheme get underway and as the Finance department continues to tap the country's record foreign reserves to pay its foreign debts.

The peso is Asia's best performing currency so far this year, up more than 7 percent against the US dollar on strong foreign inflows into Philippine stocks and bonds, fueled by forecasts of sustained and resilient domestic growth.

Budget and Management Secretary Florencio B. Abad, meanwhile, said that the government is optimistic that the country's fourth-quarter growth will remain as energetic.

"All in all, we're looking at very fruitful times ahead. With inflation kept down and an interest regime that stays low-not to mention increased public confidence in our anti-corruption and reform-oriented governance platform-we foresee the country's risk profile to improve considerably," Abad said.

Eastern Samar Rep. Ben Evardone, chairman of the House committee on public information, commented that the strong GDP growth indicates that "our country is headed towards a brighter economic outlook for the Filipino people. While the economies of the rest of the world, including our neighbors, are in turmoil, ours is spiralling upwards."

Economists polled by Reuters had forecast the economy would grow 0.4 percent in July-September from the previous quarter on a seasonally adjusted basis, picking up from 0.2 percent originally reported in April-June. (With reports from Reuters and Charissa Luci)