Growth more than expected; peso rallies
By Michelle Remo, Doris Dumlao
Philippine Daily Inquirer
First Posted 04:29:00 11/28/2008
Filed Under: Macro Economics, Economy and Business and Finance, Economic Indicators, Foreign Exchange Markets
The Philippine economy grew 4.6 percent in the third quarter, according to data the National Statistical Coordination Board (NSCB) released Thursday—slowing down from a 7.1-percent growth in the same period in 2007 but at the high end of the 3.8-4.6 percent estimate of the National Economic and Development Authority for the quarter.
“The Philippine economy has been damaged but not quite ravaged by the global financial turmoil and high oil prices,” the NSCB said in a statement.
The peso, partly aided by a higher-than-expected growth in the gross domestic product (GDP) and weak demand for foreign exchange, rallied back to the 48-per-dollar level for the first time in three weeks and closed at the day’s high of 48.80 to the dollar.
The peso rose also on upbeat stock market trading across the region and the influx of overseas Filipinos’ foreign exchange remittances ahead of the Christmas season.
Other Asian currencies also strengthened against the US dollar on buoyant stock markets although jitters over a deadly blast in India and political turmoil in Thailand tempered their gains. In the Philippines, the stock market rose by 1.8 percent to close at 1,967.01.
“But even without the GDP [report], the peso would have appreciated because when there’s no demand [for foreign exchange], inflows will drive the market,” said Jose Emmanuel Hilado, treasurer at Rizal Commercial Banking Corp.
Since the start of the year, the peso has depreciated by 15.4 percent against the US dollar, compared with a 19-percent appreciation in 2007 that made it the region’s best-performing currency.
Decent growth
The NSCB said “the decent growth in GDP drew on the strong performances of manufacturing, construction and trade. On the demand side, household spending led the growth.”
Third-quarter numbers brought the GDP growth for the first three quarters of 2008 to an average of 4.6 percent, NSCB secretary general Romulo Virola said at a press conference.
The gross national product (GNP), which includes income from abroad like remittances from overseas Filipinos, grew 6.5 percent in the third quarter, decelerating from 9.1 percent in the same period last year.
For the full year, the government expects the economy to grow 4.1-4.8 percent this year and 3.7- 4.7 percent in 2009.
The International Monetary Fund has cut its 2008 growth forecast for the Philippines to 4.4 percent from 5.2 percent earlier this year.
Of the economy’s three major sectors, only industry recorded faster growth. It grew 7.1 percent in the third quarter from 6.6 percent in the same period a year ago. Growth in the agriculture, fisheries and forestry sector slowed to 2.5 percent from 5.7 percent, while the services sector’s expansion decelerated to 3.7 percent from 8 percent.
The industry sector was boosted largely by the construction sub-sector, which grew 15.8 percent, slightly lower than 16.8 percent in the same period last year.
Officials said construction was supported by the government’s move to increase spending on infrastructure, which was aimed at pump-priming the economy amid a global slowdown.
Compensation income earned by overseas Filipino workers amounted to P270.6 billion in the third quarter, up 40 percent from P192.3 billion in the same period last year.
This was credited partly for the 4.6-percent growth in personal consumption, which the NSCB said was still encouraging although it was slower than the 5.7 percent in the third quarter of 2007.
Despite the slower growth in the third quarter, Economic Planning Secretary Ralph Recto said the figure was still decent and in fact made the Philippines outperform its neighbors, citing the third-quarter growth rates of Taiwan (1.0 percent), Malaysia (4.2 percent), Thailand (4 percent), South Korea (4.0 percent) and Hong Kong (1.7 percent). Indonesia posted a 6.1-percent GDP growth in the third quarter.
“The growth in the third quarter was aided by the aggressive push of government in public construction, both on the national and the local levels,” Recto said.
Public infrastructure spending focused mostly on accelerating projects that have been delayed.
Finance Secretary Margarito Teves said the government would continue spending heavily on infrastructure to help ensure a decent growth despite the global financial crisis.
The peso’s path
The peso had sharply depreciated in the past few days, hitting as low as 50.17 to the dollar on heightened risk aversion across global markets.
Central bank data showed outflows of foreign investments in Philippine stocks and bonds persisted in the first two weeks of November, amounting to $379.0 million after reaching $389.98 million in October.
Since the start of the year, the central bank has recorded net outflows of foreign portfolio investments totaling $1.29 billion, a reversal of $3.82 billion in net inflows in the same period last year.
Jonathan Ravelas, chief strategist at Banco de Oro Unibank, said a yearend rally of the peso toward 46 to the dollar might still be possible with strong remittance flows.
For next year, he projected a wide trading range of 43-52 to the dollar.
“Equity markets should see recovery over the course of next year as risk aversion wanes and starts to invest again,” he said, saying that current stock market valuations in the Philippines were already offering good bargains. Edited by INQUIRER.net
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