Q1 growth at 7.8%, highest in Asia

MANILA – The Philippine economy expanded by a strong 7.8 percent in the first quarter of the year, exceeding market and government expectations and making it the highest growth for the period registered among major East and Southeast Asian economies.

The growth rate was faster than the 6.5 percent recorded during the same period last year, according to data announced yesterday by the National Statistical Coordination Board (NSCB).

NSCB said the 7.8 percent expansion is the highest quarterly growth since the second quarter of 2010, when the economy posted an 8.9 percent increase—although that was due largely to the low 2009 base.

“The Q1 growth is the highest so far under the Aquino administration and also the third consecutive quarter of more than 7 percent GDP growth,” NSCB said.

National Economic and Development Authority Director-General Arsenio Balisacan said that business confidence and consumer optimism fuelled growth during the period.

“First of all, this growth rate of 7.8 percent exceeded market forecasts, including my own. But please note that I was the most optimistic of all,” Balisacan said.

“Secondly, this is also the highest among the major East and Southeast Asian economies, particularly Indonesia (6 percent), Thailand (5.3 percent), Vietnam (4.9 percent), and the People’s Republic of China (7.7 percent),” the NEDA chief said.

Balisacan said that on the production side, all major sectors contributed to the growth. The industry sector posted the strongest expansion with a year-on-year increase of 10.9 percent, followed by the services sector with 7 percent, and the agriculture sector with 3.3 percent.

“The main contributors to the strong growth of manufacturing were manufactures of food, household appliances, communication equipment, chemical and chemical products, transport equipment, and machinery and other equipment,” Balisacan said.

On the demand side, construction posted the highest growth at 33.7 percent, as both public and private construction posted double digit growths of 45.6 percent and 30.7 percent, respectively. “We have been aggressively addressing the infrastructure bottleneck, and this is evident in the 45.6 percent increase in public construction,” Balisacan said.

“The private sector is heavily investing in capacity as well. Adjusting for its magnitude, the contribution to growth of private construction is at least three times that of public construction,” the NEDA chief said.

“In fact, including other private sector investments such as on durable equipment, expenditure in capital formation, for the first time, contributed more to GDP growth than household consumption expenditure,” he noted.

Government consumption posted the second highest growth for the first quarter with 13.2 percent, which Balisacan said was primarily due to support for social programs, such as the Pantawid Pamilyang Pilipino Program and safe and potable water supply for waterless barangays nationwide.

On the other hand, net exports contracted in the first quarter due to weak external demand for electronic components.

“This situation is expected to hold until the rest of the year. For this reason, it is imperative that we diversify into other products and markets,” Balisacan said.

“In the immediate term, however, expansion in output can still be absorbed by the domestic market, supported by a better employment situation, strong inflows of remittances from Overseas Filipinos, and the low and stable inflation,” he added.

Per capita GDP surged by 6.1 percent in the first quarter of the year, faster than the 4.7 percent growth during the same period a year ago.

“We know, however, that inclusive growth is not about averages, but about the lower part of the income distribution, namely, the poor. On the other hand, we also know that growth is still the necessary condition for inclusive growth,” Balisacan said.

“The solution, therefore, is to create the conditions for sustained growth in other sectors or areas with high growth potential and link the poor to these growth centers. The faster this can be done, the better it will be for the greater number of our people,” he added.

Balisacan said that while the first quarter growth already well exceeded the 6 to 7 percent full-year goal, the government is sticking to its 2013 target, for now.

“This growth figure is significant since it puts to rest the doubts cast on the 2012 figure as being due to base effects only. It also indicates to us that we may now be moving along a new growth trajectory,” Balisacan said.