Economy expands at a ‘disappointing’ 4.8% in Q3

The domestic economy failed to live up to expectations in the third quarter, with gross domestic product (GDP) showing a 4.8-percent growth, less than the 5.2 percent to 5.8 percent projected by the government.

Economic officials said an industrial slowdown dragged economic growth to a lower-than-expected rate in the three months to September, threatening the government’s full-year target.

The National Economic and Development Authority (NEDA) said the expansion of the industry sector, which grew by only four percent, pales in comparison with the 5.6-percent growth during the previous quarter.

"We are disappointed. (It’s) not as good as we expected," Socioeconomic Planning Secretary Romulo Neri said.

In the nine months to September, the economy expanded 5.4 percent on year, falling short of the government’s target of 5.5 percent to 6.1 percent for the whole of 2006.

"The decline of mining and quarrying and the reduced growth of manufacturing contributed to the slowdown of the industry sector," added Romulo Virola, secretary-general of the National Statistical Coordination Board.

Neri, however, remained confident that the full year growth projection was within reach.

"It helps that world oil prices continue to recede," he said. "The outlook will rely on how various global downside risks will play out in the remaining month of the year, notably, a weaker US economy, our stable inflation rate, and our attainment of target revenue collections."

He said he expected agriculture, industry and services to help provide the drive for growth during the remainder of the year.

Farm sector growth accelerated while services kept up to a steady expansion amid booming exports of electronics and higher household spending driven by billions of dollars of remittances from the country’s huge overseas work force.

However, the drive to maintain fiscal discipline curtailed the government’s ability to drive demand, Neri said.

The domestic economy now needs to grow at least 5.7 percent from a year earlier in the last three months of 2006 to enable the government to reach its full-year growth target of at least 5.5 percent, said Dennis Arroyo, a senior NEDA official.

Neri said 5.6-percent third quarter growth in services, which accounts for 8.6 percent of the economy, and the 4.1 percent improvement in agriculture, which represents a gradually shrinking 17.4-percent share, were in line with government forecasts.

He said the healthy agricultural production, sustained export performance and stable services sector provided support to the country’s economic growth during the quarter.

"We note that services continued to boost the economy. Among the services sub-sectors, real estate, trade, transport and communications, and private services registered health performances," Neri said.

On the demand side, Neri said growth was stimulated by stable household consumption at 5.3 percent and exports at 9.1 percent. He likewise said that even with six tropical cyclones that hit the country during the quarter, the agriculture sector continued to perform well at 4.1 percent compared to the 1.7 percent a year ago.

"Higher spending on food, beverages, transportation and communication were observed as consumers continued to consolidate spending on essentials," he noted. — with AP, AFP