Thursday, 26 August 2010

7.9% growth for Q2

Philippine Economy Posts a Scintillating 7.9 Percent GDP Growth
Posted 26 August 2010
National Statistical Coordinating Board

Despite the El Niño phenomenon that scorched the Agriculture sector, a synergistic confluence of factors resulted in two consecutive quarters of GDP growth of over 7.0 percent. The peaceful national elections, improved investors confidence especially among local investors, the global economic recovery, increased capital expenditure of government and a low base fueled the domestic economy to a scintillating 7.9 percent growth in the second quarter of 2010 from 1.2 percent last year. The last time we experienced two consecutive quarters of more than 7 percent GDP growth was in the first and second quarters 2004 (7,2 percent and 7.1 percent, respectively), also preceding a presidential election. Together with an upwardly revised first quarter GDP growth of 7.8 percent (from 7.3 percent), the first semester sizzled to a 7.9 percent GDP growth, the highest semestral growth since 9.3 percent in the second semester of 1988.

For the second consecutive quarter, the Industry sector strongly supported by Services was the main driver of economic growth. Manufacturing sustained its first quarter production in response to the improved domestic and external demand and was shored up by Construction, Trade, and Mining & Quarrying.

On the demand side, increased consumer and government spending, increased investments in Construction and Durable Equipment, and the second consecutive quarter of immense growth in external trade contributed to the highest quarterly growth since the second quarter of 2007.

The continued inflow of compensation of our overseas workers sustained the NFIA, but at a much lower growth of 7.7 percent from 30.4 percent last year, pulling GNP growth to 7.9 percent from 4.4 percent in 2010.

For the first semester, GNP grew by 8.2 percent, its highest since 8.9 percent in the second semester of 1988.

However, removing the base effect and comparing 2010 with 2008 and 2008 with 2006, the first semester GDP growth from 2008 to 2010 is 8.8 percent, lower than the 11.6 percent first semester growth from 2006 to 2008.

The seasonally adjusted estimate of the GDP grew by 1.3 percent from 3.8 percent the previous quarter slowed down by the continuing decline of AFF. The Agriculture, Fishery and Forestry sector declined by 0.2 percent while Industry, the main growth driver for two consecutive quarters, grew at a slower pace of 3.5 percent from 5.1 percent the previous quarter. Services likewise decelerated to 0.4 percent from 4.4 percent. GNP slowed down as well to a 1.8 percent quarter on quarter growth from 2.0 percent.

Industry revved up the economy with a double-digit growth for the second consecutive quarter at 15.8 percent supported by Services which posted 6.4 percent while AFF declined by 3.0 percent for the third consecutive quarter. For the first semester, Industry grew by 15.9 percent, the highest semestral growth ever.

As population reached an estimated 93.8 million, per capita GDP rebounded by 5.9 percent, the highest since the second quarter of 2007, from negative 0.8 percent in the previous year while per capita GNP accelerated to 5.8 percent from 2.4 percent. On the other hand, Per capita PCE slowed down to 2.9 percent from 3.4 percent. At current prices, the per capita GNP now stands at P49,532 or US$ 1,082 for the first semester.

On the expenditure side, consumer spending grew at slower pace of 4.9 percent from 5.5 percent in the previous year.

With continued disbursement for ongoing projects, increased provision for pro-poor programs and the additional requirements of the 2010 national automated elections, Government Consumption Expenditure (GCE) grew, albeit at a slower pace, by 5.6 percent from 11.9 percent.

Investments in Fixed Capital Formation in the second quarter of 2010 rebounded to 25.5 percent from negative 0.3 percent boosted by increased investments in Durable Equipment and Construction.

Public Construction maintained its double-digit growth of 28.7 percent from 39.1 percent largely due to the carry-over disbursement for Ondoy rehabilitation and reconstruction activities and settlement of on-going and completed projects. Likewise, Infrastructure investments by the private sector managed to reverse the growth of Private Construction to 13.8 percent from negative 4.9 percent resulting to the expansion of Construction by 22.5 percent from 16.6 percent. Meanwhile, Investments in Durable Equipment rebounded to a roaring growth of 34.1 percent from negative 19.7 percent year ago as investments poured in to sixteen (16) out of the twenty (20) types of equipment. The growth in the investments in durable equipment was the highest registered since the second quarter of 1994.

Total Exports soared to 27.4 percent, the highest since the third quarter of 1986, from negative 18.0 percent last year as Total Merchandise Exports rebounded while Non Merchandise Exports accelerated. The country’s total merchandise exports rebounded to 30.2 percent, the highest ever, from negative 22.3 percent registered in 2009. On the other hand, Exports of Non-Factor Services accelerated to 17.2 percent in the second quarter of 2010 from 3.0 percent recorded last year.

Total imports rebounded to 23.9 percent from the negative 2.1 percent registered in the previous year, with robust performance from both Merchandise Imports and Non Merchandise Imports. Total Merchandise Imports rebounded to 25.3 percent from negative 2.1 percent posted last year. Likewise, Imports of non-factor services rebounded to 6.5 percent from negative 1.7 percent recorded in the second quarter of 2009.

Total Exports (Merchandise and Non-factor Services), valued at P760.9 billion pesos fell behind Total Imports (Merchandise and Non-factor Services), valued at P771.8 billion pesos at current prices, resulting in a trade deficit of P10.9 billion. In the same period last year, trade balance posted a surplus of 16.5 billion pesos. The current trade deficit is 0.5 percent of GNP compared to last year’s surplus of 0.8 percent.

The terms of trade during the quarter posted a trade index of 95.1 percent. This was lower than the trade index of 102.0 percent a year ago. Trading loss for the quarter amounted to 9,531 million pesos.

GNP Implicit Price Index (IPIN) stood at 541.9 percent from 520.6 percent in the previous year or 4.09 percent inflation.

Secretary General, NSCB



We just heard how the Philippine economy remained strong along with the robust growth momentum in the Southeast Asian region and other Asian economies. Real gross domestic product (GDP) expanded significantly by 7.9 percent in the second quarter following an equally strong revised 7.8 percent growth in the first quarter. These are two consecutive periods of above-trend growth.

Philippine GDP grew faster in the second quarter than Indonesia and Vietnam but slower than Malaysia, Thailand, and Singapore.

Meanwhile, the gross national product (GNP) grew by 7.9 percent on account of the 7.7 percent growth in net factor income from abroad.

The industry sector maintained its strong growth momentum in the second quarter. All sub-sectors expanded vigorously, led by the 12.4 percent growth in manufacturing and the 22.6 percent rise in construction activities. The 36.3 percent growth of the mining sector, mainly coming from nickel, gold and other non-metallic minerals, was driven by higher demand from a recovering global economy and the continued high metal prices in the world market. In addition, the 13.8 percent growth in private construction activities benefited the quarrying subsector as it expanded by 20.3 percent vis-a-vis the 4.2 percent growth in the same period in 2009. Lending support to overall growth is the utilities sub-sector, which grew by 19.1 percent on account of stable consumption and brisk pace of commercial services.

Growth in the services sector was led by trade, private services, and ownership of dwellings and real estate due to improved market sentiment, continued recovery in the global economy, and election-related spending.

As expected, growth in total agricultural production remained negative. The 3.6 percent growth in livestock, poultry, and other crops, which accounted for 40 percent of total gross value added in agriculture, failed to make up for the losses in major crops, particularly palay and corn which continued to be adversely affected by the El Niño episode.

On the demand side, domestic demand continued to significantly support overall economic growth as both consumer and investor confidence held up well in the second quarter. Investment in fixed capital grew by 25 percent, outpacing private consumption as the major source of growth. Considering the prevailing positive business sentiment, overall investment spending continued to strengthen in the second quarter. Growth was mainly driven by the private sector since investment in durable equipment rose by a hefty 34.1 percent. Further pick up in public construction contributed to the 22.5 percent increase in construction expenditure. More importantly, significant improvement in private construction spending was noted as total gross value added in private construction grew by 13.8 percent in the second quarter. Private consumption remained upbeat as evidenced by the sustained increase in spending on essentials such as food, transportation and communication, utilities, and beverages.

External demand on the other hand mainly reflected the continuing recovery of the global economy with many economies in Asia, including the Philippines, growing robustly. The country's net exports substantially improved, thus providing more contribution to growth. For instance, merchandise exports remained vibrant in the second quarter, growing by 30.2 percent in real terms as the country benefited from the strong growth in many of its Asian trading partners and the uptick in import demand of the United States. Exports of services, likewise, maintained its strong growth with a 17.2 percent expansion in the second quarter given the still vibrant BPO industry and other IT-enabled services in the country. The increase in merchandise trade flows also provided firm support to the export of transportation services including cargo handling, storage and warehousing, and packing services.

Looking forward, we still expect the agriculture sector to remain sluggish given the possibility that a transition to La Niña will materialize in the second half of 2010. However, given the stronger than expected performance of industry and services sectors and the robust investment growth in the first two quarters, it is likely that full year GDP growth in 2010 will be leaning towards the upper end of the 5-6 percent GDP target, perhaps, even higher than that.

We have once again shown that a high economic growth is attainable for the Philippines and all of us must work harder to maintain, if not surpass, this high economic growth achievement of almost 8 percent for the first semester of 2010.

Thank you very much and good morning.

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