In this Nov. 15, 2013, photo, some of the estimated 33 million coconut trees toppled by Typhoon Yolanda (Haiyan) block a road in Leyte province. Philippine economic growth in the first quarter was dampened by a major earthquake and the typhoon but the economy is still expected to hit its target for 2014, officials said Thursday, May 29, 2014. AP PHOTO/BULLIT MARQUEZ
MANILA, Philippines—The Philippine economy’s growth momentum lost steam in the first quarter of the year as the impact of Super Typhoon Yolanda (international name: Haiyan) and other natural disasters hit harder than expected.
The Philippine Statistics Authority (PSA) on Thursday reported that the Philippine economy, as measured by gross domestic product (GDP), grew by
5.7 percent in the three months to March, slowing down from the revised 6.3-percent expansion reported in the fourth quarter.
“The relatively slow growth is expected given the magnitude of the destruction,” Economic Planning Secretary Arsenio Balisacan told reporters, highlighting the damage particularly to the agriculture, trade and tourism sectors.
But most businessmen on Thursday took the GDP news in stride, even expressing optimism that the economy would bounce back by the second half of the year.
“We are positive that the economy will recover by the third and fourth quarters. The rehabilitation in Yolanda-hit areas is expected to speed up GDP growth this year,” Philippine Chamber of Commerce and Industry (PCCI) president Alfredo M. Yao said in a telephone interview.
“While lower than projected, the 5.7-percent first-quarter GDP remains strong, considering the effects of the 2013 disasters,” Makati Business Club executive director Peter Angelo V. Perfecto said in a text message.
The growth rate was the slowest since the fourth quarter of 2011. It also defied the projections of analysts and economists polled by the Inquirer earlier this week.
“We were expecting, like so many observers, we would hit the range of 6.5 to 7.5 [percent],” Balisacan said.
The peso on Thursday closed at a three-week low of 43.90 against the dollar, and even breached the 44:$1 level in intraday trade following the release of the GDP data.
This was the first time the peso traded at the 44:$1 level since the country received its latest credit rating upgrade from Standard & Poor’s.
The GDP report also took its toll on the Philippine stock market.
Lower output
Slowdowns were noted in several key sectors. For instance, agricultural output growth slowed to 0.9 percent in the first quarter from 3.2 percent in the same period last year. The manufacturing industry also suffered, growing by just 6.8 percent from last year’s 9.5 percent.
In construction, growth slowed to 0.9 percent from 31.1 percent in 2013, dragged down mainly by the private sector.
Balisacan noted that prudential measures implemented by the Bangko Sentral ng Pilipinas (BSP) aimed at keeping banks’ exposure to the sensitive real estate sector could have constrained lending to property companies.
BSP Governor Amando M. Tetangco Jr. said these measures, which include stricter monitoring of banks’ investments in property companies and the introduction of stress tests for real estate loans, were implemented to ensure growth would be sustained “over the long run.”
Sense of urgency
Balisacan said that while provinces directly affected by Yolanda accounted for a relatively small part of the economy, the damage in those areas disrupted supply chains nationwide, dragging down the entire country.
Now, the administration’s economic managers feel a sense of urgency toward the reconstruction efforts in the Visayas.
“Obviously, this will require a lot more from us, workers in government,” Balisacan said at a press conference. “We see the urgency of speeding up the reconstruction and rehabilitation efforts in the disaster-stricken areas. Reconstruction efforts will rebuild assets and restore supply chains.”
According to Gregorio S. Navarro, Management Association of the Philippines (MAP) president, reconstruction efforts “need to be hastened … if we are to meet the world’s expectations.”
Echoing traders’ optimism
Finance Secretary Cesar Purisima echoed the businessmen’s optimism, as he pointed out that the Philippines had recorded nine consecutive quarters of growth above 5.5 percent, while inflation had been kept in check.
Purisima said inflation stood at 4.1 percent in the first quarter.
Apart from the natural disasters that hit the country late last year, several business groups also blamed the truck ban imposed by the Manila city government for the lower gross domestic product in the first quarter.
“The truck ban has a big effect on business; a lot of stakeholders are complaining about it. Our costs have been going up because of the truck ban. We hope the [national] government can do something about it,” Yao said.
Foreign businessmen have also expressed their concern over the effects of the truck ban.
“Imports, exports, manufacturing and employment are going to suffer and will affect GDP growth if no concerted effort is made to find … solutions for the Manila ports accessibility,” European Chamber of Commerce of the Philippines (ECCP) executive vice president Henry J. Schumacher said in a text message.
Dutch financial giant ING Bank said growth in government consumption, which clocked in at just 2 percent, was a disappointment.
“We were expecting a more robust growth since the monthly fiscal balance reports of government pointed to higher spending,” ING economist Joey Cuyegkeng said.
With the release of first-quarter numbers, the Philippines lost its rank as Southeast Asia’s fastest growing economy to Malaysia, which grew by 6.2 percent in the same period.
Among Asia’s major economies, the Philippines slipped to third from second, with China leading the pack registering a first-quarter growth of 7.4 percent.
Still, the Philippine government remains confident of a recovery in the coming months.
Balisacan said government spending and private investments would continue to gain more traction.
He also said the government was sticking to its growth target of 6.5 to 7.5 percent this year.
“GDP figures for the first quarter of the year reflect the difficulties of the work of recovery. Indeed, Yolanda struck at several sectors crucial to driving growth, particularly the agriculture and fishing industries,” Budget Secretary Florencio Abad said in a statement.
The government said growth in the coming months would be driven by infrastructure spending by the government and increased investments by the private sector.
Balisacan also said the Philippines would continue to draw strength from its “sound” macroeconomic fundamentals, supported by remittances from overseas Filipino workers and revenue from the business process outsourcing sector.—With reports from AFP and AP
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