PH economy expands by 7% in 3rd quarter

By: Michelle V. Remo - 10 years ago

FILE PHOTO

The Philippine economy expanded 7 percent in the third quarter from a year ago on the back of rising investments, household consumption and government spending, making it one of the fastest-growing in Asia.

But growth is expected to weaken in the fourth quarter because of the devastation that Supertyphoon “Yolanda” wrought in central Philippines.

Damage from the Nov. 8 typhoon that officials said left more than 7,000 people dead or missing will cut GDP growth in October to December by 0.3 to 0.8 percentage point, Socioeconomic Planning Secretary Arsenio Balisacan said on Thursday.

Balisacan, however, said the Philippine economy was still poised to hit the official growth target of between 6.5 and 7 percent for the full year “assuming [there are] no more disasters.”

Jose Ramon Albert, secretary general of the National Statistical Coordination Board (NSCB), said GDP growth in the three months to September brought the average rate of economic expansion in the first three quarters to 7.4 percent.

GDP, or gross domestic product, is the total value of goods and services produced in a given period.

Gross national product, which includes remittances and other incomes of Filipinos based abroad, grew 11.9 percent, faster than the 7.1 percent in the same quarter last year.

Second to China

Balisacan said the country’s GDP growth in the third quarter was the second-fastest in Asia, next to China’s 7.8 percent.

“We remained one of the best-performing economies in terms of growth,” Balisacan said in a press conference at the NSCB headquarters in Makati City.

Balisacan, who also serves as director general of the National Economic and Development Authority (Neda), noted that neighboring economies, such as Thailand, Vietnam, Indonesia and Malaysia, posted growth rates in 4-and 5-percent levels.

A property boom and the services sector were the main drivers of the economic expansion in the third quarter, according to Balisacan.

He rejected suggestions that the high economic growth figures were mainly driven by speculation in real estate.

“Indicators do not support claims of a property bubble at this time,” he said.

“Our economic fundamentals are very solid. The dependence of the economy on the real estate sector is very low.”

The Philippine GDP growth rate in the third quarter, however, was slower than the 7.3 percent registered in the same period last year.

Agri, typhoon damage

The slowdown was attributed largely to the deteriorating performance of the agriculture sector whose production was dragged by unfavorable weather.

The agriculture sector grew by a mere 0.3 percent year on year in the third quarter, decelerating from the 4.4-percent growth in the same period last year.

Albert said this was partly due to damage to farms from 10 typhoons and tropical storms that struck the country during those three months.

The Philippines endures an average of 20 typhoons or tropical storms annually, many of them deadly. Most strike in the second half of the year and often cause flood damage to rice and other crops.

The services sector, which includes the business process outsourcing, registered a slower but still robust expansion of 7.5 percent. It grew 8 percent in the third quarter of last year.

The industry sector, which includes the manufacturing subsector, rose 8.2 percent, faster than the 7.1 percent in the same period last year.

Finance Secretary Cesar Purisima noted that the third quarter marked the fifth consecutive quarter that the country registered a growth rate in the 7-percent territory.

“This solid growth demonstrates the continuing resilience of the economy in the face of global economic challenges and natural calamities,” Purisima said in a statement.

Government infrastructure spending, mainly for rehabilitation of roads, was one of the key drivers of the economic expansion. Public construction grew 23.9 percent, almost triple the 8.5 percent in the same period last year.

Investments in the manufacturing subsector were another key growth driver. The sector expanded 9.7 percent, faster than the year-ago figure of 5.8 percent.

Purisima said investment rose 15.6 percent. “This, plus a structural current account surplus, well-managed fiscal position and strong governance agenda, gives us optimism for the future,” he said.

The increase in investments was credited to improving business sentiment, which in turn was partly due to the country’s attainment of investment grades earlier in the year.

Citing an improving fiscal situation, Fitch Ratings lifted in March its credit rating for the Philippines by a notch to the minimum investment grade BB-.

Standard & Poor’s did the same in May.

Moody’s Investors Service was the last of the three major international credit rating agencies to give the Philippines an investment grade. It did so in October, eliciting expectations that business sentiment would further improve.

The devastation caused by Yolanda (international name: “Haiyan”), however, is expected to cause a significant slowdown in economic growth in the fourth quarter.

Economic growth in the fourth quarter could decelerate to a range of 4.1 to 5.9 percent, according to the Neda.

This projection takes into account reports that damage to agriculture amounted to P11.3 billion and to public infrastructure, P13.2 billion.

Hardest-hit regions

The hardest-hit regions were Central, Eastern and Western Visayas, which together account for 12.5 percent of the Philippine economy.

The calamity likewise led to loss of lives. The latest death toll was reported at about 5,500.

Because of the huge damage caused by the typhoon, full-year economic growth could range from 6.5 percent to 7 percent, according to the Neda.

Before the devastation, full-year economic growth was projected to exceed 7 percent.

Balisacan said the government was in the process of implementing short-term relief and rehabilitation measures for areas hardest hit by the typhoon.

These include the construction of shelter, employment of people in affected areas in reconstruction projects and rebuilding of public hospitals, schools and government offices.

The loss of properties and sources of income is expected to pull people in affected areas below the poverty line.

But the government was hoping their stay below the poverty line would be short-lived, banking on the relief measures to be implemented, Balisacan said.

Modify infra design

Purisima said a key priority for government was mitigating the effects of climate change by modifying infrastructure location and design as well as drawing up a framework to better deal with the financial costs of its impact.

Agriculture also needs to be less disaster-prone through sustainable insurance products, he said.

Quoting the World Bank, Purisima said 0.8 percent of GDP was lost to natural calamities in the Philippines.

In October, a 7.2-magnitude earthquake caused widespread damage and killed more than 200 people in Bohol province and nearby islands, which include popular tourist spots.

Purisima appealed to the global community to craft a risk-sharing mechanism that extends beyond aid and grants.

Budget Secretary Florencio Abad said the government estimated it would need P38.8 billion to continue to provide typhoon relief supplies, restore livelihoods and employment, provide temporary shelter, rehabilitate hospitals and schools, and restore electricity and water supply in affected provinces.

He said a more realistic estimate of reconstruction costs, especially housing for hundreds of thousands of families displaced by the typhoon, could be made once more data come in.—With reports from AFP and AP