Economy disappoints

MANILA, Philippines (UPDATED)  - The Philippine economy grew by 5.7 percent in the first quarter of the year, lower than the 6.5 to 7.5-percent full-year target set by the government.

National Statistician Lisa Grace Bersales on Thursday said the first quarter gross domestic product (GDP) growth is below the 6.3-percent growth posted in the fourth quarter of 2013 and the 7.7 percent posted in the same period last year- the highest quarterly growth rate achieved in the Aquino administration.

Growth in the first three months of the year was driven by the services sector which expanded by 6.8 percent and the industry sector which grew by 5.5 percent, she said.

"Among the three major economic sectors, services made the highest contribution to the GDP growth in the first quarter of 2014 contributing 3.8 percentage points followed by industry with 1.8 percentage points, and the whole agriculture sector with 0.1 percentage point," Bersales said.

Socioeconomic Planning Secretary Arsenio Balisacan said the slow growth in the first quarter came as the economy continued to feel the lingering effects of disaster that hit the country last year. Typhoon Yolanda destroyed Eastern Visayas November last year, killing thousands and leaving billions worth of damage.

"The relatively slow growth is expected, given the magnitude of the destruction in production capacity. In agriculture, permanent crops, notably coconuts, were felled. Damage to agricultural output also disrupted supply chains, which may partly explain why food manufacturing output also declined," he said.

He added that the tourism and insurance industries likewise decelerated in the first quarter because of calamities, and prudential measures in the previous quarter to prevent real estate bubbles held back the growth in private construction.

Balisacan said that despite this, the Philippine economy's growth was the third-fastest among major economies in Asia, next to China's 7.4 percent and Malaysia's 6.2 percent.

"Despite all of these, the Philippine external market is a bright spot in the growth of the economy during the period. The country is now benefiting from the sustained growth in the global manufacturing industry. Total exports grew double digit this quarter, a rebound from the 10.6 percent contraction in the same period in 2013. Imports, notably of raw materials and intermediate goods, also improved to 8 percent from a 2.8 percent growth last year," he said.

Balisacan said the economy will continue to grow at an increasing pace in the remaining quarters of the year, as the effects of typhoon Yolanda and other disasters will be diminished.

"We remain confident that we will meet the growth target of 6.5 to 7.5 percent for the full year of 2014," he said.

Moving forward, Balisacan said the country needs to diversify the economy, develop resiliency and maximize the improving global economy. He also raised the urgency of speeding up the reconstruction and rehabilitation efforts in the disaster-stricken areas as these will restore supply chains.