After a record economic growth in 2007, the Philippine economy slowed down last year because of the global financial crisis—but the rate was still better than expected.
The economy, as measured by gross domestic product (GDP) grew by a “respectable” 4.5 percent in the fourth quarter of last year, down compared with the 6.5 percent rate in the same period the previous year, the National Statistical Coordination Board (NSCB) reported.
GDP is the total value of all final goods and services produced in a country within a year.
The economy in the last quarter of 2008 was affected by a declining services sector, which grew by only 4.9 percent from 7.8 percent and agriculture, fishery and forestry, 2.8 percent and 5.7 percent. The industry, on the other hand, accelerated slightly to 5 percent from 4.9 percent.
Consumer spending recorded a lower growth of 4.5 percent from last year’s 6.2 percent, while government spending grew slightly to 4.7 percent from 4.6 percent.
For the full year, the GDP expanded by 4.6 percent, a sharp declined from the 7.2 percent growth in the previous year—and a near three-decade high.
The 2008 GDP performance was within the government’s target of between 4.1 percent and 4.8 percent.
The government had revised the third-quarter GDP growth to 5 percent from an earlier figure of 4.6 percent.
On a seasonally adjusted quarter-to-quarter basis, the economy declined to 1 percent from 1.2 percent expansion in the previous quarter.
Impact of crisis
“The Philippine economy is not shielded from the global financial crisis as GDP continued to slow down . . . The weakening domestic economy suffered from a decline in the industry by 1.3 percent from 1.5 percent growth in the previous quarter,” the National Statistical Coordinating Board reported.
The gross national product (GNP) was 6.1 percent last year from 8 percent in the previous year. GNP includes the income of Filipinos abroad and the total costs of all goods and services, and subtracts the income of foreigners in the country.
Socioeconomic Planning Secretary Ralph Recto, also director general of the National Economic and Development Authority (NEDA), said the resilience of the Philippine economy was “broad-based.”
“I don’t expect a recession,” he said after the figures were released Thursday. “There will still be growth.”
“What saved us in the Philippines was the domestic economy,” he said. “Other countries also experienced a slowdown due to high inflation, high oil prices and the deepening global financial crisis in the fourth quarter based on available preliminary data.”
For instance, Recto said China decelerated to 6.8 percent, while Singapore contracted by 3.7 percent.
He noted that with the GDP growth at 4.6 percent for the full year 2008, the Development Budget and Coordinating Committee-approved assumption of 3.7 percent to 4.7 percent is a “welcome challenge for our economy to achieve in 2009.”
He added that infrastructure spending is critical to this year’s economic growth.
“Construction is seen to be a key growth driver for 2009, as the government realigns the budget to implement fast-moving infrastructure projects,” Recto said.
In response to the global economic crisis, the government is also partnering with the private sector for a P100-billion fund for infrastructure projects for 2009, he added.
“Ownership of dwellings and real estate is expected to sustain its robust growth, given the continued strong demand from the outsourcing firms and the OFW sector. Business process outsourcing is seen to benefit from the global economic slowdown, and this will fuel the growth of private services as well,” Recto said
The positive prospects will also come from agriculture, medical tourism, and tourism in general, he added. As the government implements fiscal and monetary policy to mitigate the impact of the crisis, our economy is expected to remain resilient and prepared for the eventual economic rebound.”
Inflation and jobs
Central bank Governor Amando Tetangco said inflation would likely fall further in January to between 7 percent and 7.9 percent, after easing to 8 percent in December because of lower oil prices and the stronger peso.
The bank has been expected to cut rates by up to 50 basis points to 5 percent, although analysts at HSBC said the “nice surprise” of the fourth-quarter growth figures could temper the cut to 25 basis points.
Recto said between 60,000 and 100,000 jobs were at risk in the “vulnerable sectors” but expressed confidence that not everyone in these areas would be laid off.
“Overall, the Philippines will be better insulated from the collapse of external demand compared with other Asian economies,” said Vincent Tien You Tsui, an economist at Standard Chartered Bank.
Exports account for just around one-third of the nation’s economy, which is also reliant on remittances sent home from the estimated eight million Filipinos working abroad.
The central bank announced last month that Filipinos working overseas sent home $1.43 billion in October, the second-largest amount in a single month since records began.
For years, the vast army of workers has managed to keep the Philippine economy buoyant with remittances, which help anchor domestic consumption.
In 2007, they sent home $14.4 billion, equivalent to 10 percent of GDP.