RP posts 4.6% GDP growth in 2002

The economy grew by a strong 4.6 percent in 2002, the highest growth rate since the Asian financial crisis six years ago, President Arroyo announced yesterday.

"This is much above the forecast four to 4.5-percent growth in gross domestic product (GDP) and much above the 2001 growth," the President told a news conference, calling it "our strongest economic performance since the Asian economic crisis in 1997." The economy had expanded by 3.2 percent in 2001.

The President said the impressive GDP growth last year was driven mainly by a notable 5.8-percent expansion in the last quarter of the year. "This growth must be translated into social equity," Mrs. Arroyo said.

But analysts warned of hurdles ahead as a war in Iraq looms and farm output moderates in 2003.

"It’s an astounding headline figure for the fourth quarter," said Song Seng Wun, regional economist at G.K. Goh Securities in Singapore.

"Looking forward, much would depend on the weather gods as well as whether imminent war in the Persian Gulf will have a significant ripple effect on economies in this region," Song said.

Some analysts, however, expressed skepticism about the data, noting that the government had earlier made a downward revision to current account data for 2000 and 2001 to reflect under-reporting of imports of electronics components.

The quarter-to-quarter change in GDP, adjusted for seasonal patterns, is the most current measure of economic performance. But it is also volatile: GDP fell 0.1 percent between the second and third quarters, according to data released by the National Statistical Coordination Board (NSCB).

The NSCB also reported that gross national product (GNP), which includes the dollar remittances of Filipino overseas workers (OFWs), rose by a stronger 5.2 percent in 2002 from a year ago.

Socioeconomic Planning Secretary and National Economic and Development Authority (NEDA) Director General Romulo Neri said that strong personal consumption and the recovery in the export sector supported last year’s economic expansion.

"With higher per capita income and low inflation rate, personal consumption rose at a healthy pace of 3.9 percent in 2002, from 3.6 percent in 2001," Neri said.

The government said it is sticking to its most recent forecast, that in 2003 GDP would be 4.2 to 5.2 percent stronger than last year’s. GDP grew 3.2 percent between 2000 and 2001.

Despite the strong growth, the economy is undermined by budget deficit problems, weak tax collection, pervasive graft, weak investor confidence and security threats from leftist and Muslim rebel groups.

President Arroyo has bowed out of the 2004 elections to focus on the economy, but analysts question whether she will be able to push through power sector reforms, curtail corruption, improve tax collections and turn her anti-poverty goals into reality.

"There’s a possible downgrade to ratings because of the deficit problem and that could have a harmful impact," said Jose Vistan, an economist at AB Capital Securities.

"Secondly, there is the issue of external uncertainty with potentially higher crude oil prices."

The key agriculture sector, which accounts for a fifth of total output, was 3.5 percent stronger in 2002, compared with the 3.7 percent growth seen in 2001 but higher than official estimates of 3.1 to 3.5 percent.

Officials blamed slowing growth in the farm sector on a dry spell during the second and third quarters that ravaged rice, corn and other major crops.

Industry, which makes up about 30 percent of total output, was up 4.1 percent in 2002 after a paltry growth of 1.3 percent in 2001.

The services sector, contributing about 40 to 45 percent to total output, was lifted by 5.4 percent by robust growth in telecommunications and call-center businesses.

"Given that agriculture is so fickle, it’s hard to see how we can see a repeat of these numbers," said George Worthington, chief economist for Asia-pacific at IFR Thomson Financial.

"The government’s 2003 GDP estimate is a little on the high side but no one saw the economy jump like it did this (fourth) quarter, so maybe they can pull another rabbit out of the hat, " Worthington said.