MANILA, Philippines - The economy expanded by 7.3 percent in the first quarter of the year, the highest quarterly growth recorded since the 8.3 percent-expansion registered in the second quarter of 2007 on the back of sustained dollar remittances from overseas Filipino workers (OFWs), election-related spending and a general improvement in the global environment, the National Statistical Coordination Board (NSCB) reported yesterday.
The NSCB said the 7.3 percent growth in gross domestic product (GDP) for the first quarter has translated to an increase in employment, creating 1.73 million new jobs seen particularly in the services sector.
The latest growth rate was a marked improvement from the 0.5 percent growth recorded in the first quarter of 2009 and was above the National Economic and Development Authority’s growth forecast for the period of 2.9 percent to 3.9 percent.
Malacañang took some of the credit for the economy’s robust performance saying it was due to the sound economic policies of President Arroyo.
Presidential Spokesman Ricardo Saludo said the growth was reflective of the increasing confidence of business and households on the economy despite the slow global recovery from the recession. He said survey late last year showed optimism among Filipinos.
“We see the strong growth in the first quarter as benefiting from the sound economic management and economic policies we’ve had in place in the last several years and these policies maintained growth even during the global recession, “ Saludo told a news briefing.
With first quarter growth surpassing expectations, Acting Socioeconomic Planning Secretary Augusto Santos said the interagency Development Budget Coordination Committee (DBCC) would soon meet to revise upward the 2.6 percent to 3.6 the economic growth target for the year. “It’s possible that 3.6 percent may be the low-end of the revised growth projection for the year,” Santos said.
“This is a pattern we have seen across Asia for the first quarter. But we are facing new headwinds such as financial headwinds from Europe,” said Jun Trinidad, an economist at Citigroup in Manila. “The economy will likely head back to trend growth in the coming quarters and heading back to trend growth will also be challenging in this environment. While a GDP forecast upgrade is definitely forthcoming in the light of this data, it wouldn’t be a lot,” Trinidad added.
The central bank has said it was watching the market turmoil caused by Europe’s debt concerns and tensions on the Korean peninsula for any impact on domestic demand and prices, a factor it would weigh at its monetary policy meeting next week.
Most analysts expect the central bank to keep rates steady at a record low four percent at its June 3 meeting, with a hike likely in the third quarter.
But the euro zone’s debt crisis could dampen global demand and push back the timing of the expected policy tightening.
“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 overseas Filipinos,” NSCB secretary-general Romulo Virola said.
By industry, the NSCB said the agriculture, fishery and forestry sector contracted by 2.5 percent while industry which includes manufacturing recovered with a 15.7 percent growth compared to the 3.8 percent growth in the previous quarter. Services grew by 6.1 percent compared to the 3.1 percent posted in the fourth quarter of 2009.
In terms of contributions to economic growth, the NSCB said the Industry sector contributed 4.8 percent while the Services sector contributed 3.1 percent. The agriculture, fishery and forestry sector, on the other hand, slashed 0.5 percent from the economic growth.
With projected population reaching 93.3 million at a slower pace than the growth of the domestic economy, per capita GDP grew by 5.3 percent from a decline of 1.4 percent, the NSCB also said.
On the expenditure side, consumer spending continued to expand in the first quarter of 2010 to 5.9 percent from three percent last year. Government consumption expenditure grew by 18.5 percent, the highest ever recorded growth from the 6.1 percent documented last year.
In 2009, the economy grew by a revised 1.1 percent or within the 0.8 percent to 1.8 percent growth projection for the year.
However, despite the 7.3 percent first quarter economic growth, the non-government think-tank IBON Foundation said this did not translate to genuine development.
“The country’s economic growth is failing to create jobs because the most dynamic sectors are export-oriented and poorly integrated into the local economy. For instance, among the fastest growing manufacturing subsectors that have driven growth are the petroleum products, electrical machinery, and chemicals which are moreover even heavily foreign-dominated,” it said.
Government may raise 2010 GDP target
The government expects to increase its 2010 growth target, currently set at 2.6 to 3.6 percent, after surprisingly strong first-quarter growth data, Santos said yesterday.
Santos said he expected the 7.3 percent pace of annual growth in the first quarter to be sustained in the second quarter.
The economy grew a seasonally adjusted three percent in the March quarter from the December quarter, much higher than forecasts of 0.8 percent growth.
On the other hand, the central bank or the Bangko Sentral ng Pilipinas said it will review its outlook for demand and inflation after the surprisingly robust first-quarter economic growth.
“We will reassess to see how this more upbeat GDP outlook would impact on investor sentiment, domestic demand and inflation expectations, as well as our inflation forecast,” central bank governor Amando Tetangco said in a mobile text message to reporters on Thursday.
“The better-than-expected Q1 GDP bodes well for a possible upgrade of the growth outlook,” he said.
Analysts said that despite the forecast-beating first quarter GDP, the central bank will keep rates on hold for some time yet amid increasing uncertainties following Europe’s debt crisis.