PH beats expectations, posts GDP growth of 6.9% in Q1

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ID-100100815The Philippines’ gross domestic product (GDP) grew 6.9% in the first quarter of the year, making the country the fastest growing among 11 Asian economies, according to the National Economic and Development Authority (NEDA).

“The 6.9 percent growth in the first quarter of 2016 showed the continuing high growth trajectory of our country’s economy,” Socioeconomic Planning Secretary and NEDA director-general Emmanuel F. Esguerra announced on May 19, adding that the growth was above market expectations given the average consensus forecast of 6.6%.

“We are pleased to be turning over a strong and stable economy onto the next administration. We have achieved significant socioeconomic progress over the last five years with the return of political and economic stability, which we hope the incoming administration will build on,”the NEDA chief said.

For the quarter, the Philippines grew faster than China, which reported a 6.7% increase in GDP; Vietnam, 5.5%; Indonesia, 4.9%; and Malaysia at 4.2%.

“This robust performance of the economy increases the likelihood of achieving the official GDP growth projection of 6.8 to 7.8 percent for full-year 2016, despite the weak agriculture and fishery sector,” Esguerra said.

On the demand side, the NEDA chief said growth was investment-driven, with significant contribution from investments in durable equipment.

Fixed capital, which Esguerra said is a better indicator of investment growth, registered a 25.5% growth and contributed 5.8% to real GDP growth. Construction also grew faster at 12% during the period, with both public and private constructions registering growth at 39.9% and 7.1%, respectively.

“All these investments give us confidence that the economy will continue to perform well in the succeeding quarters of the year and beyond,” the Cabinet official said.

In contrast, external demand weakened, with growth of exports of goods and services slowing down to 6.6%. However, imports of goods rose to 15.9% largely due to increased purchases of capital goods, which, Esguerra noted, indicates that firms are investing. Services imports remained strong at 17.5%, significantly higher than the 8.9% last year.

On the supply side, the acceleration of economic growth was fairly broad-based with growth driven by gains in the industry and services sectors, according to the NEDA chief.

The industry sector recorded a growth of 8.7%, the highest in five consecutive quarters, supported by manufacturing, construction, and utilities. Also, the services sector recorded a 7.9% growth on the back of faster growth in trade, finance, and real estate, renting and business activities.

“The strength of both the industry and services sectors once again shows the ongoing structural transformation taking place in our economy, which is crucial for sustaining economic growth and generating quality jobs,” Esguerra said.

The NEDA chief, however, said the agriculture sector remains a poor performer, contracting 4.4%, coming from almost stagnation the past year as it remains vulnerable to extreme weather events.

To give the sector a helping hand, the Cabinet official said the country must continually increase public spending in infrastructure, specifically the transport and logistics sector, “given its immense role in all sectors, but especially agriculture.

“The development of a seamless multi-modal transport network as well as improving logistics such as storage and handling mechanisms will enable a more cost-efficient movement of goods and services across regions.”

Investments in shared services and facilities, research and development, and the use of modern technology are also important in modernizing agricultural production and increasing resiliency to disasters.

“With higher quality and volume and wider variety of agricultural products, the agricultural sector can gain access to larger markets locally and even abroad,” he said.

Meanwhile, Esguerra said growth prospects for the next quarters are encouraging due to the smooth holding of the recent national elections.

“Barring a significant drop in business confidence in the second half, the economy seems to be on track in meeting the full-year target of 6.8 to 7.8 percent,” Esguerra noted.

“We are hopeful that the economic agenda of the incoming administration—that includes agricultural development, increasing infrastructure spending and expanding the government’s conditional cash transfer program, among others—will continue and build on the gains of the last five years,” the Cabinet official said.

Image courtesy of Stuart Miles at FreeDigitalPhotos.net