After a slowdown in 2011, the Philippine economy surprised market observers as it sped up by 6.4 percent in the first quarter of 2012. The continuous support from consumption and the rebound in government spending helped propel the country into one of the fastest growing in the region, according to the latest copy of Business Quarterly, a periodic bulletin that highlights key macroeconomic and industrial developments and regular publication of the Institute for Development and Econometric Analysis, Inc. (IDEA),
Per same published report, manufacturing continued to grow by a healthy 5.7 percent in the first quarter, albeit slower than the 8.1 percent posted last year. Decreases in production Miscellaneous Manufactures (-18.1 percent); Basic Metal Industries (-28.1 percent); Machinery and Equipment except Electrical (-12.6 percent); Fabricated Metal Products (-13.2 percent); and Paper and Paper Products (-6.9 percent) pulled down the subsector’s performance. Meanwhile, growth accelerated in Food Manufactures (6 percent); Furniture and Fixtures (86.6 percent); Wearing Apparel (52.2 percent); and Non-Metallic Mineral Products (24.2 percent).
Per IDEA, consistent with the broad growth seen across the Services sector, all Trade subcomponents also made positive contributions: Retail Trade (10.1 percent); Wholesale Trade (4.5 percent); and Maintenance & Repair of Motor Vehicles, Motorcycles, Personal and Household Goods (6.6 percent).
Sound macroeconomic and monetary policies supported the financial and property sectors. Financial Intermediation growth accelerated to 8.8 percent (from 6.4 percent), led by Banking Institutions (9.8 percent), while Real Estate, Renting, and Business Activities: Real Estate (24.3 percent) and Ownership of Dwellings (2.2 percent) also picked up pace. Growth in Renting and Other Business Activities, including BPO, grew 6.9 percent.
Taking into consideration the recent growth spurt in the first quarter of the year, IDEA sees the Philippine economy growing 5.9 percent for the full year on the back of increased public spending and accommodative government fiscal and monetary policies. Meanwhile, GNI is expected to expand by 6.7 percent in 2012 on the back of sustained remittance growth and improving trade performance. The growth momentum will be somewhat sustained into 2013 with both GDP and GNI growing by 5.4 percent, boosted by election spending and continued ample fiscal space on the part of the government.
Lastly, according to IDEA, lingering uncertainties will however, continue to pose risks for our economic forecasts. Deterioration in the euro zone situation and slowing Chinese and US economies are the main threats to the economy. While our forecasts have not yet factored in the effect of the latest monetary easing of policy rates to new historic lows by the central bank as a response to external headwinds, it will take some time before the monetary policy action will pass through into the financial system and the real economy. This will be taken into account in the updated forecasts next quarter.
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