Philippine GDP grows at impressive 7.3% on election spending, global recovery

20:04, May 27, 2010      

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The Philippines' GDP surged to 7. 3 percent in the first quarter thanks to election-related spending and a global recovery that boosted exports.

This is the highest first quarter economic growth of all time, according to National Statistical Coordination Board (NSCB) Secretary General Romulo A. Virola.

"Except for agriculture which was parched by the El Nino dry spell and the saturated communication subsector, all subsectors of the economy drew vigor from the global economic recovery, election related stimuli and the unbridled growth of income of our OFWs. Manufacturing rebounded astoundingly, supported by hefty contributions from trade and private services, particularly recreational and business services," Virola said in a press briefing.

The "astounding" rebound in manufacturing, which rose to an all- time high of 20.7 percent, boosted the growth of the industry sector. The industry sector rose by 15.7 percent, a turnaround from last year's contraction of 2.6 percent. The services sector expanded 6.1 percent thanks to the steady growth in the outsourcing industry and transport sector.

The El Nino-induced dry spell damaged farm production, pushing the agriculture, fishery and forestry sector to fall by 2.5 percent.

The NSCB said that the strong demand for the services and expertise of Filipinos abroad contributed to the 24.9 percent growth of Net Factor Income from Abroad (NFIA). This propelled the Gross National Product (GNP) - the highest GNP growth since the fourth quarter of 1988.

"We think, from all indications, the 7.3 percent may be sustained for the rest of the year. It is possible," Socio- economic Planning Secretary Augusto Santos said.

In a separate press briefing, Presidential Spokesman Ricardo Saludo said the impressive first quarter GDP growth is a product of sound economic management and economic policies that were implemented by the administration of outgoing President Gloria Macapagal-Arroyo.

"Despite a global recession last year, the economy continues to grow and we expect that once the global recession ends, our economy will grow even faster," he said.

"We also see this as, hopefully, a sign as well that confidence remains strong. We have seen already indications of a strong confidence even late last year on the surveys of business and on consumer spending, and it is hopefully being reflected in the first quarter," Saludo added.

Economists, however, don't share the government's optimism.

The Philippine economy is consumption-driven and in the first three months of the year, and the massive spending ahead of the May national elections boosted consumer spending, expanding at 5.9 percent in the first quarter. But Jonathan Ravelas, chief market strategist at Banco de Oro Unibank Inc notes this factor won't support the economy in the second half of the year. He doubts if this kind of growth will be sustained for the rest of the year.

Benjamin Diokno, economics professor at the University of the Philippines, said the high growth was mainly due to the low base caused by the effect of the global economic recession experienced last year.

Diokno explained that the rebound in the manufacturing sector was due to base effects. In the first quarter of last year, the manufacturing sector's Volume of Production Index (VoPI) was posting double-digit contractions. In March this year, the VoPI posted a double-digit increase of 23.1 percent.

Local think tank Ibon Foundation Inc. said strong economic growth failed to slash the high unemployment level and reduce poverty.

"This distorted kind of economic growth that creates wealth for a few without trickling down in terms of work and higher incomes for the majority of Filipinos has apparently continued in the first quarter of 2010," Ibon said in a statement.

"The only positive thing that we can get out (from the first quarter GDP) numbers is that they indicate that we're on the road to recovery," Ravelas said.

But Ravelas said it's still unclear where the economy is going in the next few months given the recent change in the administration. He's still awaiting for presumptive President- elect Benigno Aquino III to outline his economic agenda. Aquino is expected to elaborate on his agenda in his first State of the Nation Address to be delivered in July.

Source: Xinhua


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