The economy grew at its fastest pace in 17 years in the first quarter, expanding 6.9 percent from a year earlier with the services sector leading the jump, economic planning officials reported yesterday.
The first quarter gross domestic product (GDP) grew way above government’s own forecast of between 5.3 percent to 6.1 percent during the period, largely credited to healthy consumption and an expansion in back-office services.
Socioeconomic Planning Secretary Romulo Neri said the latest figures put the country’s target of 6.1- percent growth for the whole of 2007 within reach with construction, mining and business process outsourcing all expected to pick up.
Romulo Virola, secretary general of the National Statistical Coordination Board, added GDP growth in the three months to March was “the country’s highest since the first quarter of 1990.”
“The Philippines is on a roll,” President Gloria Macapagal Arroyo told reporters in Canberra, where she is on a state visit. “This is the fastest pace in almost two decades — 9.1-percent growth in services, 5.3 percent in industry, 4.2 percent in agriculture.”
“It’s a stunner,” said Bill Belchere, an economist at Macquarie Bank. “The good news is imports picking up in March, which signals that the exports sector is going to continue to be strong in the second quarter.”
“You have business expectations and improving confidence there; you’re going to have a barn burner in the first half of the year.”
The Philippines’ main export is electronics, and it imports almost all the raw material used in the sector.
Annual GDP growth in the fourth quarter of 2006 was revised up to 5.5 percent from 4.8 percent and full-year growth in 2006 was also revised up to 5.5 percent from 5.4 percent after the government accounted for an expanding BPO sector.
“It exceeded expectations, with all the sectors, especially the services and industrial sectors, performing quite well,” said Banco de Oro Universal Bank strategist Jonathan Ravelas.
“Low interest rates along with the strong peso provided a very good business environment, particularly for the industrial sector, while imports of goods used in manufacturing became cheaper,” he said, referring to gains in the peso.
Ravelas said it is likely that the economy would sustain growth rates for the remaining quarters of the year, especially if the government continued its pump-priming.
In Asia, only Vietnam with 7.7 percent and China with a mammoth 11.1 percent have announced higher annual growth for the first quarter.
Strong growth should fuel more investor interest in the Philippines, where portfolio and direct investment inflows have already boosted the stock market and the peso.
“We have sustained the growth for some time, despite the low investment-to-GDP ratio,” Neri, told reporters.
“We’d like it to improve, of course, and we’re trying to pump prime through infrastructure spending. Hopefully, the private sector will follow through with their capital spending.”
The government has said it expects work on roads and bridges to accelerate in the coming months after the lifting of a 45-day ban on spending for new capital projects ahead of elections.
Economists said robust consumer spending, a moderate recovery in farming output and sustained export growth all helped the economy pick up from the fourth quarter, when typhoons battered crops and infrastructure.
About a tenth of the country’s population work abroad and the money they send home underpins consumption, which accounts for some 70 percent of GDP.
The remittances, which last year hit a record $12.8 billion, also helped boost first-quarter gross national product, which expanded 6.6 percent from a year earlier.
Analysts expect exports, which grew at a solid annual rate of 13 percent in the first quarter, to lose momentum later in the year because of the strong peso and a slowdown in the Philippines’ main export market, the United States.
But other factors should boost GDP.
“We believe that, with ongoing strength of remittances and the desire by the government to spend more on infrastructure projects, GDP growth will remain relatively robust in the second and third quarter,” said Frederic Neumann, an economist at HSBC. – Reuters, AFP, Ted Torres