7.3% GDP growth is above expectations – economists

The economy's impressive 7.3-percent growth was above everybody's expectations, according to Dr. Victor Abola, director of the Strategic Business Economics Program of the University of Asia and the Pacific. That was the highest first-quarter growth in three decades, the National Economic and Development Authority (NEDA) said in a statement after the first quarter economic report was released Thursday morning. This is a good momentum for the country and if it continues, then "we are in line for a 5-percent to 6-percent growth for the year, well above the IMF-WB forecasts." Analysts and economist, however said it is better at this point to be cautious and to adopt a "wait-and-see stance" vis-a-vis the country's economic prospects and see if the GDP growth "is sustainable." NEDA Director General Augusto B. Santos explained that the growth was driven by industry and fueled by the recovery in manufacturing. "In particular, products of petroleum and coal, food manufactures, and electrical machinery were the major contributors to the growth of the sector. Services also improved, with trade, private services, and finance posting higher growth." Abola said the recovery in manufacturing was back-stopped by the sector's use of electricity, noting that on the average, electricity usage grew 14 percent. He pointed out that the industrial sector posted a 25-percent growth in power consumption. Abola's optimism notwithstanding, the impressive growth gross domestic may also be due to the "low-base effect" since most of the GDP sub-components posted negative growth rates last year. According to a research head of a local investment firm, "a quick glance at the underlying numbers shows that this might be a case of low-base effect. "We'll have to see if it's sustainable." Whether first quarter growth could be sustained remains to be seen as it was driven in part by consumer spending, said Dr. Carlos C. Bautista, professor and graduate school program director of the University of the Philippines' College of Business Administration. NEDA’s Santos, however, said that "the continued strong inflows of remittances and the increase in employment, particularly in services, both fueled consumption." [See Economy grows 7 percent in Q1, highest in 3 decades – NEDA] Aside from the sustainability of consumer-led growth, Bautista, pointed out that the peso-dollar exchange rate could still be a wild-card in the months ahead. The peso has been losing against the greenback, an offshoot of the weakening global market fueled by Europe's financial woes. On May 21, the peso dropped to 46.50 per US dollar, its lowest since Nov. 18, 2009 when it closed at 46.78. It closed at P46.47 Thursday. Historically, a steep drop the peso’s exchange rate translates to a slow down in GDP, Bautista said. "If the peso weakens further, it will adversely affect the economy given that most of the country's imports are mostly capital goods and production inputs like oil." Santos also stressed that the economic growth in the first quarter translated to an increase in employment of almost two million. For Abola more jobs could fuel a consumption-based growth that, if managed well, can be positive for the economy. Various construction activities in the first quarter also contributed to the economy's robust growth, Abola said. Among the property development companies, he pointed out that SM Development Corp. was aggressively putting up condominium buildings in Metro Manila. VS, GMANews.TV