But the figure was better than most private sector forecasts of below five percent, leading government officials to expect gross domestic product (GDP) to meet the earlier forecast of between 5.7-and 6.3-percent growth this year.
"Despite doubts, we achieved this despite all the political troubles, all the political noise," a jubilant President Arroyo said in Malacañang. She attributed the decent growth to the fiscal and economic reforms she implemented, such as the expanded value added tax which, she said, would benefit the whole of the country and the people.
Though the GDP fell below the government’s target, the President said the figure was still one of the highest posted in recent years and was exceeded only by the six-percent GDP growth rate in 2004.
In terms of gross national product (GNP), growth was recorded at 5.7 percent due to the robust increase in inflows from abroad mostly coming from overseas Filipino workers (OFWs).
The $10.85 billion of remittances from Filipinos working overseas in 2005 compares with the central bank’s 2005 forecast of $10.2 billion and $8.54 billion in 2004.
The funds helped boost 2004 economic growth to 6.1 percent, the fastest in 15 years. The Philippines ranked third, after Mexico and India, in the amount of remittances it receives, according to the Asian Development Bank.
"Long-term economic growth is not sustainable if it’s coming mostly from remittances," said Shane Oliver, head of investment strategy at AMP Capital Investors in Sydney. "To maintain a strong living standard, the Philippines needs to encourage investment and that will build productive capacity and sustain consumption over the long-term."
Remittances are making up for the slowing exports, which account for about two-fifths of GDP.
Exports remained sluggish growing only by 2.3 percent in 2005 compared to the robust 14.1 percent growth in 2004.
The agriculture sector, which employs nearly four in 10 Filipinos, "moderately expanded" by 2.0 percent last year due to the "tempered growth of crops, restrained growth of livestock and weak poultry growth," Socioeconomic Planning Secretary Augusto Santos told a news conference.
All sub-sectors in industry posted "remarkable growth" except for utilities, which suffered because of reductions in government spending to achieve its fiscal deficit target, he said.
Without the effects of El Nino dry spell, GDP growth last year would have been 5.7 percent and Santos said the dry spell tempered the performance of agricultural crops.
The key services sector rose 6.3 percent, while the industrial sector managed a 5.3 percent expansion. Manufacturing rose 5.6 percent, the highest since 2001.
"The economy regained the growth momentum that got derailed during the third quarter," said Romulo Virola, secretary-general of the National Statistical Coordination Board (NSCB).
"All major sectors contributed positively to the growth of the economy despite the persistent increases in oil and consumer prices and the political turmoil that continued to hound business and government," he added.
But growth needs to be sustained to a level where majority of the poor would actually benefit from it, he said.
A continuing political crisis hounding the Arroyo presidency, higher oil prices and an uptick in inflation would continue to be key challenges to the economy this year.
The President survived an impeachment bid in Congress last year, but her popularity remains in the doldrums over allegations she cheated in the 2004 polls. Allies have deserted her and calls for her resignation continue.
Dennis Arroyo, plaming and policy director of the National Economic and Development Authority said a boom in the mining industry and huge revenues from a higher consumer tax could generate up to P77.5 billion in extra revenue this year.
Since the Supreme Court in Dec. 2004 threw out a legal challenge on a law that liberalized the mining sector, 24 mining projects have generated $339.7 million in investments, creating some 5,000 jobs.
"We expect a mining boom and that war chest of P77 billion is a big factor," said Arroyo, who is not a relative of the President.
"Even critics of the economy say we are resilient. We are more than resilient, we are tough," he added.
Santos said government planned to generate more investments this year in key areas such as in infrastructure and implement reforms in the power sector.
He said that while the fiscal position remained weak, it is continually improving.
The budget deficit is expected to fall to P124.9 billion or 2.21 percent of GDP this year from P146.5 billion in 2005, he said.
But there remains a need to boost tax administration, catch tax evaders and improve collection, Santos said. — With Aurea Calica, AFP and Ted Torres