RP posts slower growth of 4.6% in third quarter

The economy posted a slower growth in the third quarter of 2008 at 4.6 percent from 7.1 percent a year ago as the country started to feel the adverse effects of the global financial crisis.

Socioeconomic Planning Secretary and NEDA Director General Ralph Recto said in a press briefing yesterday that for the first nine months of the year, gross domestic product (GDP) growth was recorded at 4.6 percent, lower than the 7.1-percent GDP growth registered for the same period last year.

However, Recto said the Philippines is not expected to slip into recession next year despite the impact of the global financial crisis but merely cool its growth engines.

The real economy is expected to grow between four to 4.6 percent this year, and from between 3.7 percent to 4.7 percent in 2009, with a bias toward the lower end of the target. Gross domestic product (GDP) growth in 2007 was a high 7.2 percent.

Key factors that weighed down on the country’s growth in the third quarter of the year were high inflation, high oil and commodity prices, and the effects of the global credit crisis.

But declining prices of oil and commodities in the world market will ease inflation pressures in the fourth quarter which will keep the full year growth of the country within the four- to 4.6-percent range.

Recto said that the Philippines can achieve the higher band of the 2009 growth forecast if, among others, revenue collection improves dramatically with the fiscal reforms, including revisions in fiscal incentives and sin taxes.

National Economic and Development Authority (NEDA) Director Dennis Arroyo added that other plus factors in favoring relatively strong growth next year, are the continuous inflows of remittances from overseas Filipino workers (OFWs), and an increase of 20 percent in public spending on infrastructure.

“Likewise, the strengthening of the US dollar vis-à-vis the peso favors an increase in remittance inflows which will fuel private consumption,” Arroyo added.

Working against stronger growth in the last quarter of this year, and most of 2009, is anticipated lower corporate earnings from 35- to 30 percent.

To counter the negative effects of the global crisis, Recto said the Philippines must strictly adhere to fiscal reforms, continue to spend on infrastructure, ensure more jobs, and expand socio-economic activities, especially safety nets against unemployment, and plant closures.

Meanwhile, the Philippines was the second highest among the ASEAN 5, next to Indonesia, which grew by 6.1 percent. Singapore and Taiwan contracted by 0.6 percent and one percent, respectively while Malaysia, Thailand, South Korea, and Hong Kong grew by 4.2 percent, four percent, four percent, and 1.7 percent, respectively.

Gross national product (GNP) expanded by 6.5 percent in the third quarter. Total overseas Filipino remittances grew by 25.5 percent in the same period, which mainly caused the 24.7 percent growth in net factor income from abroad (NFIA).

The agriculture, fisheries and forestry (AFF) sector ran out of steam and expanded just 2.5 percent from 5.9 percent in the same period last year. Palay production registered a double-digit growth but corn production was battered by typhoons Frank, Karen and Nina and the shift of harvest time from the third to the second quarter. The fisheries sub-sector however, slowed down as both municipal and commercial fishing were hit by higher oil prices in the third quarter.

The industry sector grew by 7.1 percent with key sub-industries exhibiting resilience. Food manufactures remained as the major contributor to growth, as it posted accelerated growth fueled mainly by the production of sugar, coconut, processed meat and fish.

Meanwhile, export-oriented industries grew by 4.8 percent. The aggressive push of government in public construction as indicated by the 52.7 percent and 11.6 percent increases in national and local government spending on infrastructure and other outlays; and the sustained demand for real estate by overseas Filipinos and BPO sectors, both helped push total construction to reach a strong 21.3 percent growth.

The services sector, which comprised almost half of GDP, eased to a 3.7 percent growth, compared to the eight percent for the same period a year ago. This was the result of the slack in demand caused by high domestic inflation, which peaked at 12.2 percent.

Filipino consumers remained upbeat on furnishing their homes with new appliances, and on spending for household operations. The lower private consumption in the third quarter, in turn, resulted in slower growth in transportation and communications and trade. 

Recto, said that growth in ownership of dwellings and real estate got slightly clipped, but still grew respectably, as some buyer-investors paused to reassess their industry.

“Given the strong demand for residential space from overseas Filipinos and for commercial space from the outsourcing and offshoring companies, the sector remained upbeat,” he added.