RP posts ‘astounding’ 3.3% GDP growth

Despite plunging exports and a hazardous political climate, the economy grew far stronger than expected in the second quarter, boosted by robust agriculture production and higher domestic demand. Government data showed gross domestic product (GDP) expanded by 3.3 percent in the second quarter – a growth rate which one Singapore investment bank that tracks the Philippines called "astounding" given market estimates of 2.5 percent to 2.8 percent. It was also better than the economic performance of most countries in the region.

Growth in the first half of the year was recorded at 3.3 percent, slower than the 3.8 percent in the same period last year.

The government revised upward the growth figure in the first quarter to 3.2 percent from 2.5 percent.

Socioeconomic Planning Secretary Dante Canlas said that, despite the global slowdown, the economy showed resiliency in the second quarter with domestic demand stoked as the Bangko Sentral ng Pilipinas (BSP) kept interest rates low.

"The economy exhibited sufficient resiliency and bounce on a global economic platform studded with dead spots," Canlas said.

Asked if the country would escape recession this year, he said: "I think so."

"If it is (third quarter GDP growth) better than expected, we should see continuing growth, rather than a contraction or a recession," he said.

Government said GDP should grow at an annual 2.6 percent and 3.9 percent in the third and fourth quarters, respectively, and kept its 3.3 to 3.8-percent annual GDP growth forecast for 2001.

Canlas said the weak US economy and deteriorating Asian economies would weigh on the Philippines going forward. "We have to be cautiously optimistic because we are seeing a rapid weakening of our neighbors in East and Southeast Asia. Many of our electronics are also being exported to Singapore and Korea and Taiwan," he said.

"So if they continue to weaken, we also have to watch out," Canlas added.

Strong sectoral growth

The industrial sector grew 3.6 percent year-on-year in the second quarter, with manufacturing posting a slight growth of 2.6 percent in the period against expectations for a contraction.

Construction also bounced back to a 6.6 percent growth in the period from a contraction of four percent in the first quarter.

"On the manufacturing side, we would have to say the sector performed much better than expected and it explains why (GDP) was better than expected," said Andrew Long, research head of Vickers Ballas Securities Philippines.

Services expanded 3.4 percent in the period, with transportation and communications rising 7.1 percent mainly on strong demand in telecommunications.

Services accounted for about 55 percent of total GDP growth, which agriculture, fishery and forestry which grew three percent in the period.

RP eludes technical recession

With the slowdown in most Asian countries like Singapore and Taiwan, the Philippines along with Indonesia, ranked among the few countries in the region which posted over three percent GDP growth in the second quarter.

The country eluded a technical recession in the first half, as seasonally adjusted quarter-on-quarter GDP grew 1.5 percent in the second quarter.

The first quarter GDP was revised to 0.1 percent quarter-on-quarter growth from previously announced 0.5 percent contraction. A technical recession is often defined as two successive quarters of seasonally adjusted contraction.

For the October-December quarter, traditionally the strongest quarter, growth is forecast at 3.9 percent.

If the government’s projections for the second half are correct, full-year GDP growth is forecast at 3.9 percent.

"But a lot depends on the US recovery being on track," said Song Seng Wun, a regional economist with GK Goh Securities Inc. "If this doesn’t happen, the Philippines may join its neighbors (Singapore and Taiwan) in recession. –With reports from Ted Torres