Surprisingly strong showing

According to the latest copy of Business Quarterly, a periodic bulletin that highlights key macroeconomic and industrial developments and regular publication of the Institute for Development and Econometric Analysis, Inc. (IDEA), after a slowdown in 2011, the Philippine economy surprised market observers as it sped up by 6.4 percent in the first quarter of 2012. The continuous support from consumption and the rebound in government spending helped propel the country into one of the fastest growing in the region.

Per IDEA, to the surprise of market observers, the Philippine economy grew by a higher-than-expected 6.4 percent in first quarter of 2012 from 4.9 percent in the same period last year – behind only China in the East and Southeast Asian region. On the demand side, household consumption expenditure remains a steady pillar of growth while net exports seem to have gained better footing at the start of the year. While accounting for a smaller share of gross domestic product (GDP), government spending also pitched in with a double-digit growth rate after the administration was roundly criticized for underspending last year. Meanwhile, solid growth in services and manufacturing propped up the economy on the production side even as the agricultural sector slowed down.

Accordingly per same published report, as wage earnings of overseas workers posted an uptick, Net Primary Income (NPI) and Gross National Income (GNI) grew 4.0 percent and 5.8 percent, respectively. On a per capita basis, GDP and GNI grew 4.6 percent and 4.0 percent, respectively, with the population projected to reach 95.2 million. Compared to the fourth quarter of last year, GDP and GNI grew a seasonally-adjusted 2.5 percent and 1.3 percent, respectively.

The Services sector was the economy’s main growth driver in the first quarter of the year, picking up the pace to 8.5 percent from 3.6 percent the previous year. As a percentage of GDP, the sector’s share improved to 56.2 percent from 55.12 percent last year. Services growth was fairly broad-based and benefitted from strong tourist arrivals, with expanded gains in Transportation, Communication, Hotels and Restaurants, and Recreational, Cultural, and Sporting Activities. Buoyant remittances, better consumer and business confidence, and benign inflation expectations supported the sector’s growth, as well.

Overall, the subsectors growth rates in decreasing order are as follows: Other Services (10.5 percent); Transport, Storage and Communication (9.0 percent); Trade (8.9 percent); Financial Intermediation (8.8 percent); Real Estate, Renting, and Business Activities, which includes Business Process Outsourcing or BPO (7.9 percent); and Public Administration and Defense (1.5 percent). Other Services enjoyed brisk growth rates from tourism-related activities such as Recreational, Cultural, and Sporting Activities (23.4 percent); Other Service Activities (45.2 percent); and Hotels and Restaurants (10.9 percent). To a lesser extent, Transport and Storage also benefitted from improving tourism activities with positive growth in all its subsectors: Land Transport (6.5 percent); Storage and Services Incidental to Transport (8.6 percent); Water Transport (9.5 percent); and Air Transport (6.1 percent).

(to be continued)

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