PH economy grows 7.8 pct in Q1; highest in Asia
05/30/2013
MANILA, Philippines (4th UPDATE) - The Philippine economy grew by an "impressive" 7.8% in the first quarter on higher consumption, manufacturing and government spending, according to the National Statistical Coordination Board (NSCB).
This is faster than last year's 6.5% growth and the previous quarter's revised 7.1% expansion.
Socioeconomic Planning Secretary Arsenio Balisacan said the figure is the highest so far among the major East and Southeast Asian economies, particularly Indonesia, Thailand, Vietnam and China.
In the first quarter, Indonesia grew by 6%, Thailand by 5.7%, Vietnam by 4.9 and China by 7.7%.
"This growth rate of 7.8 percent exceeded market forecasts, including my own... This growth figure is significant since it puts to rest the doubts cast on the 2012 figure as being due to base effects only. It also indicates to us that we may now be moving along a new growth trajectory," Balisacan said.
Moreover, the 7.8% growth is the highest so far under President Aquino's administration.
The stellar growth that beat market forecasts was driven by the strong performance of the manufacturing and construction segments which buoyed the industry sector's at 10.9%, NSCB Secretary General Jose Ramon Albert said.
Baliscan noted the manufacturing sector contributed the most to the growth in industry, offsetting the drop in exports.
"I am proud to say, that despite the contraction of 8.4 percent in our goods exports, local manufacturing has grown at an impressive rate of 9.7 percent, primarily from what can only be deduced as a heightened domestic demand," he said.
Balisacan noted the construction sector's 32.5 percent growth also "indicates a good positioning towards an industry-led economy."
"The sector has been increasing rapidly with double digit growth rates since the second quarter of 2012. Initially, this was led by infrastructure spending of the government. By the second half of 2012, private construction started to rebound," he said.
At the same time, continued rise in consumer and government spending, sustained growth in the services sector at 7%, and a 3.3% expansion in the agriculture sector all contributed to the growth, Albert said.
The NSCB stressed this is the highest quarterly GDP growth since the second quarter of 2010.
The government still hopes to grow the economy by 6% to 7% this year, as Balisacan noted the first quarter GDP figure would be considered once the targets are under review.
"We remain vigilant of downside risks. Disasters can negate the gains and even push back development. Moreover, the global economy remains fragile, negatively affecting our trade performance. Due to the attractive investment opportunities, we are also at risk of receiving too much capital inflows as advanced economies implement quantitative easing. The challenge is to channel these inflows into productive investments," Balisacan said.
A Reuters survey of economists had earlier placed the first quarter GDP number at 6.1%, while Bloomberg projected 6%. Both are slower than the fourth quarter last year.
Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo on Wednesday said the first quarter growth was expected to be "impressive", as suggested by various demand indicators.
On Wednesday night, the NSCB revised the 2012 GDP growth to 6.8% from an earlier 6.6%, after the fourth quarter GDP figure was hiked to 7.1% from 6.8%.
Meanwhile, markets' reaction to the data was mixed. The peso was off early lows and was quoted at 42.35 per dollar at 0216 GMT from a low of around 42.515 in early deals. But the Philippine stock market was down around 1 percent.
Economists said the central bank would most likely leave its key overnight borrowing rate on hold for the rest of the year, with inflation forecast to stay within the central bank's 3 to 5 percent target band this year despite strong growth.
The central bank next meets to review policy on June 13. It has kept its policy rate steady at a record low of 3.5 percent since December 2012, but has slashed the rate on its special deposit account (SDA) facility by more than 200 basis points since July 2012 to divert credit to more productive use.
"We think the BSP (Bangko Sentral ng Pilipinas) will continue to cut the SDA rate to lift domestic spending as well as save costs," said Trinh Nguyen, economist at HSBC in Hong Kong.
With the outlook on exports still murky, domestic consumption will remain as the main driver for economic growth this year.
Domestic demand is seen holding up well in 2013, underpinned by strong remittances, low inflation and record-low borrowing costs.
Economists forecast full-year 2013 growth of 6.2 percent, slower from the previous year but better than the 5.9 percent estimate in a Reuters quarterly poll in April. -- with Karen Lema, Reuters
This is faster than last year's 6.5% growth and the previous quarter's revised 7.1% expansion.
Socioeconomic Planning Secretary Arsenio Balisacan said the figure is the highest so far among the major East and Southeast Asian economies, particularly Indonesia, Thailand, Vietnam and China.
In the first quarter, Indonesia grew by 6%, Thailand by 5.7%, Vietnam by 4.9 and China by 7.7%.
"This growth rate of 7.8 percent exceeded market forecasts, including my own... This growth figure is significant since it puts to rest the doubts cast on the 2012 figure as being due to base effects only. It also indicates to us that we may now be moving along a new growth trajectory," Balisacan said.
Moreover, the 7.8% growth is the highest so far under President Aquino's administration.
The stellar growth that beat market forecasts was driven by the strong performance of the manufacturing and construction segments which buoyed the industry sector's at 10.9%, NSCB Secretary General Jose Ramon Albert said.
Baliscan noted the manufacturing sector contributed the most to the growth in industry, offsetting the drop in exports.
"I am proud to say, that despite the contraction of 8.4 percent in our goods exports, local manufacturing has grown at an impressive rate of 9.7 percent, primarily from what can only be deduced as a heightened domestic demand," he said.
Balisacan noted the construction sector's 32.5 percent growth also "indicates a good positioning towards an industry-led economy."
"The sector has been increasing rapidly with double digit growth rates since the second quarter of 2012. Initially, this was led by infrastructure spending of the government. By the second half of 2012, private construction started to rebound," he said.
At the same time, continued rise in consumer and government spending, sustained growth in the services sector at 7%, and a 3.3% expansion in the agriculture sector all contributed to the growth, Albert said.
The NSCB stressed this is the highest quarterly GDP growth since the second quarter of 2010.
The government still hopes to grow the economy by 6% to 7% this year, as Balisacan noted the first quarter GDP figure would be considered once the targets are under review.
"We remain vigilant of downside risks. Disasters can negate the gains and even push back development. Moreover, the global economy remains fragile, negatively affecting our trade performance. Due to the attractive investment opportunities, we are also at risk of receiving too much capital inflows as advanced economies implement quantitative easing. The challenge is to channel these inflows into productive investments," Balisacan said.
A Reuters survey of economists had earlier placed the first quarter GDP number at 6.1%, while Bloomberg projected 6%. Both are slower than the fourth quarter last year.
Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo on Wednesday said the first quarter growth was expected to be "impressive", as suggested by various demand indicators.
On Wednesday night, the NSCB revised the 2012 GDP growth to 6.8% from an earlier 6.6%, after the fourth quarter GDP figure was hiked to 7.1% from 6.8%.
Meanwhile, markets' reaction to the data was mixed. The peso was off early lows and was quoted at 42.35 per dollar at 0216 GMT from a low of around 42.515 in early deals. But the Philippine stock market was down around 1 percent.
Economists said the central bank would most likely leave its key overnight borrowing rate on hold for the rest of the year, with inflation forecast to stay within the central bank's 3 to 5 percent target band this year despite strong growth.
The central bank next meets to review policy on June 13. It has kept its policy rate steady at a record low of 3.5 percent since December 2012, but has slashed the rate on its special deposit account (SDA) facility by more than 200 basis points since July 2012 to divert credit to more productive use.
"We think the BSP (Bangko Sentral ng Pilipinas) will continue to cut the SDA rate to lift domestic spending as well as save costs," said Trinh Nguyen, economist at HSBC in Hong Kong.
With the outlook on exports still murky, domestic consumption will remain as the main driver for economic growth this year.
Domestic demand is seen holding up well in 2013, underpinned by strong remittances, low inflation and record-low borrowing costs.
Economists forecast full-year 2013 growth of 6.2 percent, slower from the previous year but better than the 5.9 percent estimate in a Reuters quarterly poll in April. -- with Karen Lema, Reuters
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