The Philippine economy will likely exceed its target growth rate of 5.0 to 6.0 percent this year, after third quarter gross domestic product (GDP) grew by 7.1 percent compared with the same period last year, said the National Economic and Development Authority (NEDA).
“We posted the fastest economic growth within the ASEAN region. We are well on our way to surpassing our growth target of 5 to 6 percent this year and this economic expansion continues to be broad-based, as almost all sectors posted higher year-on-year growth rates,” says Socioeconomic Planning Secretary Arsenio M. Balisacan.
Indonesia came in second in terms of third-quarter growth in gross domestic product (GDP) with 6.2 percent, followed by Malaysia (5.2%), Vietnam (4.7%), Thailand (3.0%) and Singapore (0.3%). On the other hand, China registered a 7.7-percent GDP growth in the said period.
This registered growth in the third quarter of 2012, which was way above the market median forecast of 5.4 percent, brought the Philippines’ year-to-date economic performance at 6.5 percent.
“As you can see, our efforts at good governance are beginning to bear fruit. But we know that our task is far from over,” the Cabinet official said.
He added that the government will face the fourth quarter not only with utmost optimism but also with careful vigilance, especially noting the challenges ahead such as the unresolved problems of the Euro area and the looming fiscal cliff in the US.
“This, combined with our strong macroeconomic fundamentals and good economic prospects, has resulted in the appreciation of our currency threatening to erode our competitiveness. Rest assured that we are monitoring this development very closely,” notes Balisacan, who is also NEDA Director-General.
Household spending contributed more than half of GDP in the third quarter in terms of the demand side. This was supported by slower movement of prices, as headline inflation averaged 3.5 percent from July to September 2012.
Household expenditure was also backed by the continuous improvement in consumers’ confidence. This was reflected in the Bangko Sentral ng Pilipinas’ Consumer Expectations Survey in July, where respondents cited greater availability of jobs and more employment as one of the factors for their positive outlook.
“The steady inflow of remittances from overseas Filipinos, which grew by 4.2 percent in peso terms, also contributed to the higher household spending,” he said.
On the other hand, the exports sector continued its rebound this year, increasing by 6.7 percent in the third quarter from a decline of 14.8 percent in the same period last year.
“Although the sector’s growth was still subdued, the surge in the overseas sales of metal components (466%), telecommunications (473.8%), and office equipment (106%) may be a sign of renewed vitality of the regional production networks, of which we are a part,” said Balisacan.
The high growth of export of goods was coupled with the increase in export of services, which grew by 7.6 percent in the third quarter from 5.3 percent in the same period last year. Particularly, growth in the business process outsourcing (BPO) sector was observed, as miscellaneous services grew by 10.2 percent, up from 6.6 percent last year.
While contractions were experienced in the export receipts of semiconductors and electronic data processing equipment, both items significantly contributed to imports performance, which likewise rebounded to 8.3 percent in the third quarter from a negative 1.8 percent in the same period last year.
“This may mean that manufacturers have been stocking up on intermediate inputs in anticipation of a recovery in the global demand for electronic products,” said Balisacan.
Meanwhile, spending for construction of physical capital increased by 24.3-percent in the third quarter of 2012, a huge turnaround from a negative 8.8-percent performance in the third quarter of 2011.
“Both private and public construction registered more than 20-percent growth rates during the said period. We have previously noted that a major driver of this growth is the demand for office space due to the strong outlook of the BPO sector. Also, favorable economic conditions led more individuals to purchase residential properties,” he said.
Furthermore, public spending on construction grew, backed by the 38.4-percent expansion in government’s capital outlay for roads and irrigation projects. “Most of these projects were implemented outside the National Capital Region, in keeping with our objective of inclusive growth,” said Balisacan.
Finally on the demand side, government spending expanded by 12 percent, as personnel services grew by 11.9 percent due to the implementation of the last tranche of the Salary Standardization Law.
On the supply side, services continued to account for the biggest share of the GDP at 58 percent. This was led by trade, which grew by 7 percent in the third quarter of 2012.
Significant positive performances were also noted in transportation and communication storage, due to the decline in domestic petroleum prices that helped increase land transportation by 5.5 percent and buoyed by communication with a 9.6-percent growth.
Agriculture also delivered in a big way during the third quarter. Worth mentioning is the big increase in palay and corn outputs, which may be due to the governments’s food security program.
“The fishery sector however remains a problem, as it continues to contract. Needless to say, this is already being addressed and we hope to see a recovery of the sector soon,” said Balisacan.
In the industry sector, the 5.7-percent expansion posted by the manufacturing sector in the third quarter of 2012 was a marked improvement from the 2.0-percent increase in the same quarter last year.
“Still, we hope that the industry sector would expand much faster and also see a more robust growth in the manufacturing sector. We are counting on a growing manufacturing sector to provide the higher quality jobs that are also more stable and remunerative,” he said.
Meanwhile, the peso on Tuesday rose further to break into the 40-to-a-dollar territory on the back of robust remittances and increased appetite among investors for peso-denominated securities.
The local currency closed at a new 56-month high of 40.87 against the greenback, gaining 13 centavos from the previous day’s finish of 41:$1. The intraday high hit 40.85:$1 while the intraday low was 41:$1. Volume of trade amounted to $899.52 million, up from $655.09 million on Monday.
The peso’s movement on Tuesday brought the local currency’s appreciation since the start of the year to about 7 percent, making it one of the strongest currencies in the region.