Slight GDP growth seen in 2nd quarter

The economy is expected to post a slight improvement in the second quarter of the year due to the initial impact of the increase in power rates and some growth in the services sector, government sources disclosed yesterday.

After expanding by a slower 4.6 percent in the first quarter, government economists said they expect another plateau in the second quarter but added a slight growth is possible depending on the performance of the agriculture sector.

Sources from the Development Budget Coordinating Committee (DBCC) said that the second quarter gross domestic product (GDP) would be supported by the continued growth of the services sector which accounts for 48 percent of total domestic output.

In industry, they said utilities are expected to pick up slightly from the adjustment in power rates and the initial impact of the oil price hikes that benefited oil companies.

According to sources, only agriculture was still a wildcard although there were indications that good weather had allowed early harvest during the last month of the quarter.

Sources explained that even the slowdown recorded in the first quarter was expected since economic activity had already reached a plateau earlier.

"When you see a plateau, the next thing you’d expect is deceleration," they explained. "But there are indications that the deceleration has somewhat abated and there might be a slight improvement in our growth rate in the second quarter."

The first quarter GDP had decelerated from 6.4 percent over the same period last year to only 4.6 percent this year and even with the 6.7 percent growth in Net Factor Income from Abroad (NFIA), the gross national product (GNP) still grew by a slower 4.7 percent, from 6.4 percent a year ago.

In the second quarter, the services sector is expected to sustain the 6.9 percent growth it recorded in the first quarter while industry is projected to hold steady.

Services, which comprise about 48 percent of total GDP, provided the biggest contribution to GDP growth with 3.23 percentage points. The leading contributors to the sector’s growth in first quarter were trade, transportation, commu-nication and storage (TCS), and ownership of dwellings and finance.

Industry, which accounts for about 32 percent of GDP contributed 1.38 percentage points to total GDP growth. All sub-sectors posted higher growths but the decline of mining and quarrying caused the overall deceleration of industry during the quarter.

Agriculture, fishery and forestry (AFF), which accounts for about 20 percent of total GDP suffered a reversal during the first quarter of 2005, contributing a negative 0.02 percentage point to total GDP growth as most of the major crops, except coconut and banana, declined during the period.

Fishery and poultry were the saving graces, providing 2.17 percentage points to total AFF growth.