GDP growth beats forecast, hits 6.9% in Q1

By Czeriza Valencia (The Philippine Star), May 20, 2016, http://www.philstar.com/business/2016/05/20/1584900/gdp-growth-beats-forecast-hits-6.9-q1

MANILA, Philippines – The Philippine economy expanded at a better-than-expected rate of 6.9 percent in the first quarter of the year, outpacing growth in most Asian countries during the period, on the back of strong domestic consumption and government spending, the state-run data agency said yesterday.

The Philippine Statistics Authority reported that economic output – as measured by gross domestic product (GDP) – in the first three months of the year grew much faster than the five percent pace in the same quarter the previous year and picking up further from the revised 6.5 percent clip in the fourth quarter of 2015.

The 6.9-percent growth was above market expectations given an average consensus forecast of 6.6 percent for the quarter and was the fastest since the seven percent growth in the third quarter of 2013.

The PSA said growth during the period was driven mainly by the services and industry sectors.

The industry sector rose at a faster rate of 8.7 percent, the fastest in five consecutive quarters, supported by manufacturing, construction and utilities.

The service sector, on the other hand, grew 7.9 percent on higher gains in trade, finance, real estate, renting and business activities.

“The strength of both the industry and services sectors once again shows the ongoing structural transformation taking place in our economy, which is crucial for sustaining economic growth and generating quality jobs,” said Socioeconomic Planning Secretary Emmanuel Esguerra, also the director general of the National Economic and Development Authority (NEDA) which oversees the PSA.

He noted while the economy continues to traverse a high growth trajectory because of gains the country’s main economic drivers, the agriculture sector remains a poor performer particularly as the prevailing dry spell is causing the sector’s output to decline.

In the first three months of the year, the sector contracted 4.4. percent, although no spikes in food prices were recorded due to good management of food stocks. As such, Esguerra said the government must increase public spending on infrastructure and logistics in the farm sector so more farm products can gain access to local and foreign markets.

The farm sector should also brace for the occurrence of La Nina, which now has a 75 percent probability of occurrence. Esguerra said the first quarter GDP growth increases the likelihood the government’s full-year growth projection of between 6.8 percent to 7.8 percent would be attained.

The Philippines was the fastest-growing economy in the first quarter among 11 selected Asian economies that already released growth data for the period. The country outpaced China, whose economy grew 6.7 percent; Vietnam, 5.5 percent, Indonesia, 4.9 percent and Malaysia, 4.2 percent.

“We are pleased to be turning over a strong and stable economy onto the next administration. We have achieved significant socioeconomic progress over the last five years with the return of political and economic stability, which we hope the incoming administration will build on,” he said.

Growth prospects in the next three quarters is also encouraging, said Esguerra.

“Growth in the second quarter of an election year percentage point is usually stronger than in the first quarter,” he said. “This is usually .4 to .5 percent higher than the growth in the first quarter.”

Esguerra also noted business expectations remain optimistic in the second quarter.

“Within the near-term, strong domestic demand is expected to support economic growth, offsetting the possible downward pressure coming from weak global output. Manufacturing is seen to retain its momentum given the country’s strong consumer base. The demand-side of the economy is expected to derive its vigor from household consumption given upbeat consumer sentiment and improving employment opportunities,” he said.