August 26, 2010, 5:19pm
The Philippine economy pulled off another surprise in the second quarter, growing at its fastest annual pace in years, buoyed by a rebounding export sector and consumer spending fueled by a steady stream of money sent home by Filipinos working overseas and election spending.
The National Statistical Coordination Board (NSCB) said on Thursday that gross domestic product (GDP) in the April-June quarter expanded 7.9 percent from the year-earlier period, when the economy rose at a sluggish 1.2 percent due to the global economic slowdown.
The GDP expansion in the second quarter was higher than the 7.3 percent recorded in the first quarter which was revised by the NSCB to 7.8 percent. This was the second time in six years that the domestic economy posted a back-to-back robust growth above 7.0 percent, which most economists noted came preceding a presidential polls. The last time was in the first and second quarters of 2004 wherein the local economy grew by 7.2 and 7.1 percent, respectively.
The highest recorded was 8.3 percent in the second quarter of 2007.
Socio-Economic Planning Secretary Cayetano Paderanga said the Philippine economy grew faster in the second quarter than Indonesia and Vietnam but slower than Malaysia, Thailand, and Singapore.
Despite the better-than-expected GDP performance, Paderanga said the government will keep the growth target for the year since spending plans based on the current target are already set at a range of 5-6 percent.
Although he said that the projected the local economy to grow at a rate higher than the official target.
Like Paderanga, Finance Secretary Cesar V. Purisima believed that the domestic economy has shown more resilience than neighbors including Malaysia and Thailand, where growth is slowing as faltering recoveries in the US and Europe threaten exports.
“It's a reflection of the economic activity during the time of elections. Looking at the number, I am very pleased and I am hopeful that if we will implement the programs that we have identified as such as investments in infrastructure, we will be able to sustain the number,” Purisima told reporters.
He, however, admitted that the challenge is to sustain the growth momentum.“The key is sustaining it, not just keeping it once. Sustaining it for over a long period of time.”
The financial markets reacted positively to the good performance.
As of 1:13 p.m. on Thursday, the peso appreciated 0.3 percent to 45.122 to a dollar while the benchmark stock index rose 1.2 percent to 3,595.58. The Philippine composite index has increased 17.8 percent this year.
The peso’s two-day advance has erased almost all of the 1 percent slump on August 24, a day after a sacked policeman killed eight members of a Hong Kong tourist group.
“With upbeat economy and improving consumer sentiment plus Christmas holiday season, I see it sustainable,” BDO Capital and Investment Corporation President Ed Francisco said.
Meanwhile, Yuji Kameoka, a senior economist based in Tokyo at Daiwa Institute of Research Limited said the Philippine growth is also strong like other Southeast Asian countries.
The country’s gross national product (GNP) rose by 7.9 percent on account of the 7.7 percent growth in net factor income from abroad. Net factor income refers mostly to the dollar remittances of millions of overseas Filipino workers.
“We have once again shown that a high economic growth is attainable for the Philippines and all of us must work harder to maintain, if not surpass, this high economic growth achievement of almost 8 percent for the first semester of 2010,” Paderanga said.
He pointed out that the industry sector maintained its strong growth momentum in the second quarter.
“All sub-sectors expanded vigorously, led by the 12.4 percent growth in manufacturing and the 22.6 percent rise in construction activities.
The 36.3 percent growth of the mining sector, mainly coming from nickel, gold and other non-metallic minerals, was driven by higher demand from a recovering global economy and the continued high metal prices in the world market.”
Complementing this was the 13.8 percent growth in private construction activities, which benefited the quarrying subsector as it expanded by 20.3 percent vis-a-vis the 4.2 percent growth in the same period in 2009, said Paderanga.
“Lending support to overall growth is the utilities sub-sector, which grew by 19.1 percent on account of stable consumption and brisk pace of commercial services.”
Growth in the services sector was led by trade, private services, and ownership of dwellings and real estate due to improved market sentiment, continued recovery in the global economy, and election-related spending.
However, Paderanga said agricultural production performance remained in the negative territory. The 3.6 percent growth in livestock, poultry, and other crops, which accounted for 40 percent of total gross value added in agriculture, failed to make up for the losses in major crops, particularly palay and corn which continued to be adversely affected by the El Niño episode.
On the demand side, domestic demand continued to significantly support overall economic growth as both consumer and investor confidence held up well in the second quarter, said Paderaanga.
Investment in fixed capital grew by 25 percent, outpacing private consumption as the major source of growth.
Considering the prevailing positive business sentiment, the overall investment spending continued to strengthen in the second quarter.
Paderanga said the growth was mainly driven by the private sector with investment in durable equipment up by a hefty 34.1 percent. Uptick in public construction, also, contributed to the 22.5 percent increase in construction expenditure.
Significant improvement in private construction spending was noted as total gross value added in private construction grew by 13.8 percent in the second quarter.
Another factor was the upbeat in private consumption as evidenced by the sustained increase in spending on essentials such as food, transportation and communication, utilities, and beverages.
On the other hand, external demand, mainly, reflected the continuing recovery of the global economy with many economies in Asia, including the Philippines, growing robustly. This was mirrored by the expansion in the country's net exports, thus providing more impetus for growth.
Merchandise exports remained vibrant in the second quarter, growing by 30.2 percent in real terms as the country benefited from the strong growth in many of its Asian trading partners and the uptick in import demand of the United States.
Exports of services, likewise, maintained its strong growth with a 17.2 % expansion in the second quarter on the backdrop of a vibrant Business Process Outsourcing (BPO) industry and other IT (information technology)-enabled services in the country.
The increase in merchandise trade flows also provided firm support to the export of transportation services including cargo handling, storage and warehousing, and packing services, said Paderanga.