PHL economy slows down, posts 3.4% GDP growth in Q2

The Philippine economic output in the second quarter of the year decelerated to a low 3.4 percent growth as the country braced for the impacts of various uncertainties in the global market, the National Statistical Coordination Board (NSCB) reported Wednesday. The figure is 1.5 percentage points lower than the gross domestic product (GDP) rate recorded in the previous quarter and significantly lower than the 7.9 percent rate recorded in the same period in 2010. Moreover, the second-quarter figure is well below the 4.5 percent to 5.5 percent forecast rate of the National Economic Development Authority (NEDA). GDP is the amount of goods and services produced by a country in a given period. In a statement, Socioeconomic Planning Secretary Cayetano Paderanga said the slow growth in the quarter was expected due to the "tapering off of the base effect and the absence this year of growth drivers in the second quarter of 2010." These growth drivers include electron-related spending as well as the "stronger than expected" recovery from the global financial crisis, he specified. Despite the slow overall output, the NSCB said the economy benefited from headline growth in the agriculture and services sector, which grew by 7.1 percent and 5.0 percent, respectively, during the quarter. "On the demand side, the growth came mainly from consumer spending as fixed capital formation particularly Construction has not really felt the promise of the Public and Private Partnership program, while external trade has been lackluster at best," said Romulo Virola, NSCB secretary-general, in a statement. Rebounding expenditures, imports During the period, household spending grew by 5.4 percent, buoyed largely by consumer spending on miscellaneous goods and services as well as food and non-alcoholic beverages. Meanwhile, government spending, which caused the 1st-quarter GDP to decelerate to 4.9 percent, picked up a bit to grow by 4.5 percent compared to year-ago figures. While still experiencing negative growth, exports of services managed to contain the 19.5 year-on-year decline during the first quarter, as it falls by 2.2 percent during the second quarter. Total exports, however, fell by 0.3 percent during the period. On the other hand, total imports registered a modest 4.1-percent hike during the period, buoyed largely by imports of services which expanded by 19.2 percent as imports of goods slowed to 1.1 percent. The economic uncertainties in western countries coupled with the continuing unrest in the Middle East and North Africa pulled down on the country's Net Primary Income, the NSCB said, as it declines by 2.8 percent during the quarter. This caused the Gross National Income (GNI) to experience a similar decline, as it settles at 1.9 percent from 9.2 percent the previous year, "its lowest growth during the last four years," the NSCB noted. NEDA's Paderanga said this was brought about by lower net compensation as remittances from Filipinos abroad grew by only 1.4 percent in peso terms. Sectoral gains The continued rebound of sugarcane, corn and palay harvests buoyed the Agriculture, Hunting, Forestry and Fishery sector gains to a 7.1-percent year-on-year growth during the period. Sugarcane, in particular, posted a three-digit 504.3 percent during the period after suffering a 56.3-percent decline during the same period last year. Similarly, Palay recovered from its 7.3-decline last year to a positive growth of 13.2 percent in the period. "The growth can be attributed to the expansion and recovery of harvest areas from the adverse effects of the El Niño phenomenon in 2010," the NSCB said. Financial intermediation, on the other hand, led the growth in the services sector for the period, as it posts a 9.9-percent growth. This was followed by public administration & defense (7.3 percent), other services (5.8 percent) and real estate, renting & business activities (5.7 percent). Despite gains in public expenditure during the quarter, public construction continues its double-digit decline as it falls by 48.9 percent, causing the construction industry group to contract by 16.1 percent and the overall industry sector to settle at a negative 0.6-percent growth. Private construction, meanwhile, posted a steady 26.3-percent year-on-year growth, up slightly from the 21.6-percent growth in the previous quarter. With projected population reaching 95.6 million, per capita GDP grew by 1.5 percent but per capita GNI stood still while per capita HFCE grew by 3.5 percent. Per capita GNI is the value of a country's goods and services in a given period divided by its total population. Future prospects The 3.4 percent GDP in the second quarter brings the first semester growth to 4.0 percent, NEDA's Paderanga said. "To attain the 7 to 8 percent growth target for 2011, the economy needs to grow by at least 10 percent in the second semester," he explained. Paderanga further stressed that prospects for the second half of the year are much better than the first-half performance given the upward trajectory of sectors such as agriculture, manufacturing, private construction, tourism and mining. Moreover, business sentiment for the next quarter has improved as the business confidence index rose to 34.1 percent from 31.8 percent in the second quarter, Paderanga said. He added that investments will continue to rise given the bright outlook in the expansion plans of firms across several industry subsectors. In terms of public construction and government spending, which stunted first-quarter growth and continued to pull down the second-quarter GDP, Paderanga said it will likely pick-up "due to the accelerated spending plan of [government agencies] and the Department of Budget and Management (DBM) for the rest of the year." Global risks Paderanga cautioned, however, against excessive optimism regarding the country's 2011 growth, as uncertainties in the global market continue to affect domestic output. "The International Monetary Fund (IMF) announced four days ago that although global economic recovery is on its way, risks to the global economy exist given the balance sheet problem and continuing weak consumption in the United States, and the fiscal problems and sluggish output in the Euro zone," he stressed. Given this, Paderanga said the Economic Development Cluster of the administration will be prioritizing measures that will boost domestic demand, accelerate fiscal spending and take advantage of closer relations with fast-growing ASEAN neighbors. Some of these measures may include accelerated infrastructure projects, diversification of domestic and external trade and sustaining domestic consumption, among others. "We want to optimize fiscal spending’s contribution to growth. As such, the accelerated spending program aims to fast-track government disbursements in the second half of the year, in order to shore up the level of economic activity," he added. Government spending, Paderanga predicts, may reach P240.3 billion for the rest of the year as the DBM continues to intervene in speeding up spending and implementation of programs and projects that will boost the economy. -- JM Tuazon/OMG, GMA News