Q2 growth figure nears 2012’s 6% goal

The Philippine economy grew at a slower pace of 5.9 percent in the second quarter of the year, although the growth was still above analysts’ average forecast of 5.3 percent and the Southeast Asian average of 4.7 percent.

With the second-quarter result, Socioeconomic Planning Secretary Arsenio M. Balisacan said on Thursday that the country is within range of hitting the upper end of the government’s full-year economic growth target of 5 percent to 6 percent.

“With the inflation kept close to the lower bound of the BSP [Bangko Sentral ng Pilipinas] target of 3 to 5 percent, we maintain our view that the FY [Fiscal Year] 2012 real GDP [gross domestic product] growth rate projection of 5 to 6 [percent], perhaps the higher end of the target, is well within reach,” Balisacan added.

He said the widespread floods in August that inundated an estimated 80 percent of Metro Manila, as well as nearby provinces, can be converted into a plus factor for the economy as the private and public-sector spending for repairs is kicking up.

Also, Balisacan added, the country’s exports have become diversified that the Philippines is no longer too vulnerable to shocks in shipment of electronics and semiconductors, the top export merchandise.

And while the Philippines is expected to experience El Niño within the year, it will just be weak to moderate, he said.

Balisacan added that investments to address the country’s infrastructure shortfalls would also sustain domestic growth. “We just have to maintain the positive investment climate.”

The National Statistical Coordination Board (NSCB) announced also on Thursday “the domestic economy accelerated in the second quarter of 2012 to 5.9 percent from 3.6 percent recorded the previous year, boosting the first semester growth to 6.1 percent from 4.2 percent.”

It said the “resilient” services sector remained the main driver of growth supported by the sustained growth of manufacturing and the rebound of construction.

While the growth was faster compared to last year, the NSCB added, the first quarter of 2012 recorded better increment at 6.4 percent.

“I see our growth keeping the momentum of the first two quarters. We just have to make sure that our fiscal house is always in order. We also have to address our shortcomings like infrastructure and the cost of doing business and ease of transacting with the government. There are high-hanging and low-hanging fruits that we can address to show that we are serious,” Balisacan said.

NSCB said continued inflow of remittances from overseas workers pushed the growth of net primary income (NPI) from the rest of the world to 4.5 percent from a decline of 1.1 percent in 2011, enabling gross national income (GNI) to accelerate to 5.6 percent from 2.4 percent.

For the first semester, the GNI grew by 5.4 percent from 3.0 percent in the first semester of 2011.

On a seasonally adjusted basis, GDP decelerated at 0.2 percent.

“Similarly, the GNI grew by a slower pace of 1.0 percent in the second quarter of 2012.  All three major sectors failed to sustain their gains in the first quarter of 2012.  The agriculture, hunting, forestry and fishery sector posted a 1.2-percent growth in the second quarter from 2.7 percent in the first quarter of 2012.  Industry declined by 2.4 percent from a 3.8-percent gain in the previous quarter.  Services sector posted a 1.5-percent growth for the second quarter of 2012 from 2.6 percent in the previous quarter,” the NSCB said.

With the Philippine population projected to reach 96 million, per capita GDP accelerated to 3.7 percent.  Similarly, per capita GNI upped its growth by 3.4 percent.

The Philippines outperformed Malaysia (5.4 percent), Thailand (4.2 percent), Vietnam (4.4 percent) and Singapore (2.0 percent). Indonesia grew 6.4 percent and China, 7.8 percent.

Balisacan said the Philippines’s “strong” growth in the second quarter is in large part due to the accelerated public investment, as well as recovery in capital formation.”

“Government spending on public construction in the second quarter grew by 45.7 percent year-on-year, while capital formation grew 2.3 percent as compared to a decline of 10.5 percent in the same period last year. The capital formation figures strongly suggest that investments, which had been negative in previous quarters, have bottomed out, and that growth in capital formation is resuming,” he added.

The second-quarter growth of 5.9 percent has heightened the likelihood that the full-year growth this year will approximate 6 percent, according to Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr.

In a text message, Tetangco said also on Thursday that the growth performance in March to June proved better than expected and should “boost market confidence that the economy will be able to grow at closer to the higher end of the government target of 5 percent to 6 percent.”

“This should also support the financial markets, including the spot foreign exchange market,” he added, alluding to the Philippine Dealing and Exchange Corp. where the local currency the peso trades in volumes typically reaching $1 billion a day.

This means that the peso, which has strengthened by some 5 percent since the start of the year, would continue to gain value relative to the US dollar.

HSBC economist Trinh Nguyen in reaction said the Philippine growth performance continues to impress with strong growth posted in the second quarter.

“Second-quarter GDP growth did not disappoint, reflecting strong domestic demand that was supported by robust fiscal spending, resilient remittances and record- low interest rates. Net exports contributed to growth, too, thanks to the expansion of services,” she added.

“With inflation likely to increase significantly in the coming months due to higher transportation costs, short-term food supply shocks and strong domestic demand, the BSP will likely hold rates steady at 3.75 percent to buy more time for monitoring price and external conditions,” Nguyen said.

Tetangco vowed to review the current monetary policy stance “and calibrate any further action taking into account, among others, the impact of further acceleration in government spending toward rehabilitation and reconstruction after recent natural calamities, weakness in global demand and possible improvements in the market sentiment toward peso assets.”

He said there remains room in the central bank’s policy tool kit to address different factors affecting the stability of prices to prevent inflation from going out of hand.

Nguyen said with growth robust in the first six months and likely to end the year at or around six percent, the BSP can afford to focus on inflation.

“With inflation likely to rise significantly in the coming months due to anticipated food supply shocks, higher transportation prices and still strong domestic demand, monetary officials will likely keep rates steady at 3.75 percent,” she added.

Malacañang is “very happy” with the second-quarter growth and remained confident of attaining the government’s “realistic”  5-percent-to-6-percent target for the year, Secretary Ramon Carandang of the Presidential Communications and Strategic Development Planning Office said in a news briefing also on Thursday.

Carandang added that the 5.9-percent growth “exceeded the market expectations” which was 5.3 percent, and that it is “among the highest in Asia, among our peers.” (MAX V. DE LEON / REPORTER, Jun Vallecera and Mia M. Gonzalez, Businessmirror)