Economy stays robust

THE ECONOMY grew by 5.9% in the second quarter, at par with market expectations, the government yesterday reported, citing construction activities and state spending as the main drivers.

Gross domestic product (GDP) growth — just a shade higher than the 5.86% median forecast in a BusinessWorld poll of economists — was slower than the previous quarter’s revised 6.3% but an improvement from last year’s 3.6%.

This brought first half growth to 6.1%, slightly higher than the government’s full-year 5-6% target. A year earlier, growth was only 4.2%.

“The resilient service sector remained the driver of growth supported by the sustained growth of manufacturing and the rebound of construction,” said Lina V. Castro, officer in charge of the National Statistical Coordination Board (NSCB).

“On the demand side, growth came from the positive contribution of all the expenditure items, except for changes in inventories, led by consumer spending and the improved growth of external trade,” she said in a news briefing.

Socioeconomic Planning Secretary Arsenio M. Balisacan told reporters that state spending would continue to support growth for the third quarter, with the government still aiming to hit the high end of its 5-6% target for 2012.

“The second-quarter performance validates the strong growth recorded in the first quarter,” he said.

The service sector recorded the highest growth at 7.6% during the period, supported by gains in transport, storage and communication at 9.6%; real estate, renting and business activities at 8.5%; and other services at 8.3%.

Industry went up by 4.6%, slower than the last quarter’s 5.3% but a reversal of the 1.4% decline posted in the second quarter last year. Construction recorded the fastest rise at 10.0%, while manufacturing posted a 4.0% increase.

But mining and quarrying — which fell by 7.3% — bucked the industry sector’s upward trend.

Agriculture output, meanwhile, grew by just 0.7%, with agriculture and forestry gaining 1.5%. Fishing dropped by 2.4%.

Government spending grew by 5.9%, with spending on public construction alone up by 45.7% in the second quarter. Capital formation, meanwhile, grew by 2.3%, compared with the 10.1% decline in the same period last year.

Mr. Balisacan said the results showed that the economy remained cushioned against external threats, performing even better than its regional peers. He noted that the country’s 5.9% growth in the second quarter was higher than Malaysia’s 5.4%, Thailand’s 4.2%, Vietnam’s 4.4%, and Singapore’s 2.0%.

Hongkong and Shanghai Banking Corp. (HSBC) economist Trinh D. Nguyen shared the view: “The Philippines remains resilient against global headwinds due to both timely fiscal and monetary policy as well as the fundamental structure of its economy.”

“Despite slowing remittances, private consumption accelerated as a result of accommodative monetary policy — interest rates were at a record low. The business process outsourcing (BPO) sector also helped keep exports of goods and services growing, as many firms in developed economies are turning to the Philippines’ top-ranked voice service to reduce costs. All these factors enabled the country’s growth to accelerate in the first half,” she added.

The government, while upbeat, is not going to change this year’s growth target. “We are not revising target growth of 5-6%, we are confident [that] we will get 6%,” Mr. Balisacan said.

“If we surpass it, then all well and good,” said Budget Secretary Florencio B. Abad, who is also chairman of the interagency Development Budget Coordinating Council, which sets the government’s macroeconomic targets.

As for the third quarter, Mr. Balisacan said the impact of typhoons and flooding would be “modest,” but noted the threat of a dry spell could persist until the first quarter of next year.

Finance Secretary Cesar V. Purisima, for his part, also noted the resilience of the Philippine economy.

“Despite the deceleration of global growth, and with the backdrop of increasing uncertainty in the US and in the euro zone, our second-quarter growth was at a respectable 5.9%, beating market expectations and placing us at the upper end of our full-year forecast,” he said.

The first semester’s 6.1% result so far surpasses the 4.7% average in the last decade, Mr. Purisima noted. –KAREN JOYCE Q. ANG and DIANE CLAIRE J. JIAO, Businessworld