MANILA, Philippines – The Philippine economy galloped to its highest annual growth after the Marcos administration, surging by 7.3 percent in 2010 on the back of a global economic recovery.
Analysts said the growth is a boost for President Aquino’s new government as it seeks to attract more foreign investment and enable the long underperforming economy to catch up with its fast-developing Asian neighbors.
National Statistical Coordination Board (NSCB) secretary general Romulo Virola said the 2010 growth surpassed official growth projections of five to six percent. The economy grew by only 1.1 percent in 2009, hit by the global financial crisis.
“Despite the El Niño and the diminished government spending during the second semester, the domestic economy sizzled to its highest annual GDP growth in the post-Marcos era of 7.3 percent in 2010 from 1.1 percent in 2009,” Virola said.
Extra money that was pumped into the economy as politicians campaigned for national elections in the middle of the year, as well as higher remittances from the millions of Filipinos working abroad, also helped, Virola said.
For the fourth quarter, the economy grew by 7.1 percent, higher than the revised third quarter growth of 6.3 percent.
Seasonally adjusted gross domestic product (GDP) grew three percent last year following a contraction of 0.8 in the previous quarter while seasonally adjusted gross national product accelerated to 2.9 percent from the 0.2 percent growth in the third quarter of 2010.
With the economy growing by 7.3 percent in 2010, per capita GDP rose by 5.3 percent in 2010 from a decline of 0.9 percent in 2009.
The industry sector, led by mining and quarrying and manufacturing, fueled economic growth last year, expanding by 12.1 percent from a decline of 0.9 percent the previous year.
The services sector, led by trade and transport also supported growth with an expansion of 7.1 percent from 2.8 percent the previous year.
On the other hand, the agriculture sector, dampened largely by the El Niño weather condition, contracted by 0.5 percent from zero growth in 2009.
Virola said that for the fourth quarter of 2010, the industry sector posted a growth of 8.3 percent, almost sustaining its third quarter growth. Services likewise accelerated, growing by 6.9 percent from 3.1 percent. The agriculture, fishery and forestry sectors, meanwhile, rebounded by 5.4 percent from a decline of 2.9 percent after being battered for four consecutive quarters by abnormal weather conditions.
Despite the rosy performance of the economy, Socioeconomic Planning Secretary Cayetano Paderanga Jr. said there are no plans yet to revise upward the government’s seven percent to eight percent economic growth target for 2011.
“The seven percent to eight percent is a target we would like to have. With this target, we would like to make a dent on employment and poverty alleviation,” said Paderanga.
He said that risks to growth remain such as the movement of commodity prices particularly oil and minerals and the disturbances in the global economy.
Nonetheless, Paderanga said that over the next six years, the government is looking forward to a sustained strong economic performance.
“This will be built on strengthened partnerships with the private sector as we shift to an investment-led growth. In order to further expand the economy’s productive capacity and provide enough opportunities for a sustainable and inclusive growth, government efforts shall be directed towards an integrated infrastructure program that will support the productive sectors and redound to substantial benefits to society,” Paderanga said.
Strong growth wont stoke inflation
The Bangko Sentral ng Pilipinas (BSP) reiterated yesterday that the stronger-than-expected economic growth last year would not stoke up inflation as there is enough liquidity in the financial system that could support further growth.
BSP Governor Amando Tetangco Jr. in a text message to reporters said that the 7.3 percent gross domestic product (GDP) growth registered last year from 1.1 percent in 2009 was already factored in when monetary authorities set its inflation target for the medium term.
“We had already incorporated a higher fourth quarter growth rate than the official government target in our forecast exercise. So for purposes of our forecast path, the higher than market expectation GDP growth would not necessarily throw this off. Inflation remains manageable,” Tetangco stressed.
He pointed out that there is enough liquidity in the financial system to support further economic growth as economic mangers has set a GDP growth target of between seven percent and eight percent this year.
For one, special deposit accounts (SDAs) deposited in the vault of the central bank stood at P1.23 trillion last year.
On the other hand, the country’s domestic liquidity or M3 expanded by 7.5 percent to P4.14 trillion as of end-November last year from P3.856 trillion as of end-November 2009.
“There is sufficient liquidity in the system to fund further growth. As long as the unwinding of funds kept with the BSP is orderly and such funds are channeled to productive uses, this should not necessarily be inflationary,” the BSP chief said.
The BSP has set an inflation target of three percent to five percent between 2011 and 2014. It expects inflation to average 3.6 percent this year and three percent next year after inching up to 3.8 percent last year from 3.2 percent in 2009.
M3 is the amount of money circulating in the domestic economy. At a time when the economy is booming and money supply is expanding rapidly, the central bank would normally step in to mop-up in order to ensure that inflation would not surge. – Iris C. Gonzales (The Philippine Star) With Lawrence Agcaoili
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