The Philippine economy grew a better-than-forecast 6.9 percent in the first quarter of the year, the government said Thursday, putting it on track to meet full-year targets and making it one of Asia’s best performers for the three-month period.
The GDP figure beat economist forecasts of about 6.6 percent, and marks the highest quarterly growth in the Philippines since the end of 2014.
The National Economic Development Authority (NEDA) said among 11 selected economies that have already released their growth data for the quarter, the Philippines registered the fastest growth rate, followed by China at 6.7 percent, Vietnam at 5.5 percent, Indonesia at 4.9 percent, and Malaysia at 4.2 percent.
The result is also an improvement from the upwardly revised 6.5 percent gross domestic product (GDP) growth recorded three months earlier, and the highest since the 7.6 percent in the second quarter of 2013.
The economy expanded by 5.2 percent in the same period last year.
It was achieved despite a drought-ravaged farm sector and relatively weak exports, and also coincided with months of campaign spending for May 9 presidential elections, Economic Planning Secretary Emmanuel Esguerra said.
“We are pleased to be turning over a strong and stable economy to the next administration,” Esguerra said, referring to president-elect Rodrigo Duterte, who takes office on June 30.
“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,” he added.
Services, industry offset agriculture
The Philippine Statistics Authority (PSA) said first-quarter growth was led by the services and industry sectors, which expanded by 7.9 percent and 8.7 percent from 5.5 percent and 5.3 percent, respectively.
“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 told reporters.
On the other hand, agriculture declined by 4.4 percent, the fourth consecutive quarterly decline since the second quarter of 2015, from an expansion of 1.0 percent in the first quarter of 2015.
“But while our economy continues to traverse a high growth trajectory during the first quarter of the year, the agriculture sector remains a poor performer,” Esguerra, who is also the director general of NEDA, said.
He said the agriculture sector remains vulnerable to extreme weather events, noting that these past two quarters, El Niño reduced agricultural output considerably, similar to the 1998 episode.
In particular, on the demand side, growth was investment-driven, with significant contribution from investments in durable equipment, he said.
Fixed capital registered 25.5 percent growth, while construction grew 12 percent, he added.
“All these investments give us confidence that the economy will continue to perform well in the succeeding quarters of the year and beyond,” Esguerra, said.
In contrast, external demand weakened, with growth in exports of goods and services slowing to 6.6 percent.
However, imports of goods rose to 15.9 percent largely due to increased purchases of capital goods, an indication that companies are investing more money in their businesses.
Services imports remained strong at 17.5 percent, significantly higher than the 8.9 percent last year.
Esguerra said the growth prospects for the economy in the next quarters are encouraging.
Within the near-term, strong domestic demand is expected to support economic growth, offsetting the possible downward pressure coming from weak global output.
Manufacturing is anticipated to retain its momentum given the country’s strong consumer base, while the demand side of the economy is expected to benefit from upbeat consumer sentiment and improving employment opportunities, the NEDA chief said.
However, Esguerra noted that the agriculture and fishery sectors will continue to reel from the lingering impacts of El Niño, though the transition to a normal weather condition is already happening.
“We should also start preparing for La Nina, which now has a 75 percent probability of occurrence,” he said.
The pressing need, therefore, is to build socioeconomic resiliency of individuals and communities, Esguerra suggested.
This can be done through productivity improvements, crop and income diversification, disaster preparedness, social protection, access to saving instruments and social insurance programs, he said.
“We must continually increase public spending on infrastructure, specifically in the transport and logistics sector, given its immense role in the all sectors, but especially agriculture,” he added.
Full-year growth seen topping 6%
Private analysts, meanwhile, said the 6.9 percent expansion in the first quarter would allow the Philippines to grow above 6 percent for the full year.
“Although we are keeping our growth forecasts for the next couple of years unchanged at 6.5 percent, the risks for next year, at least, are now to the downside,” said London-based research consultancy firm Capital Economics.
Capital Economics said first-quarter GDP showed that presumptive President Rodrigo Duterte will be handed an economy that is in very good health.
“The foundations are in place for growth to remain strong, at least in the short term, but Duterte’s election has elevated the risks to the medium-term outlook,” it said.
The think tank believes that in the short term, the economy looks well placed to continue growing at a strong pace on robust consumption, solid fiscal position and the rebound in exports that should benefit from an expected pick-up in global economic growth.
For the medium term, Capital Economics’ outlook took into consideration Duterte’s victory: “He has suggested recently that he will not be looking to rock the boat as far as economic policies are concerned, hinting that he might even look to retain some members of Aquino’s economic team.”
Meanwhile, Singapore-based bank DBS said that GDP growth is still set to come in above 6 percent this year.
“One concern is that of weak export growth, following the -15.1 percent showing for March. But domestic demand is, by far, the main driver of overall GDP and the former has stayed robust thus far this year,” it said.
DBS added that since the new government is pro-growth, the pace of fiscal spending may even tick up under president-elect Duterte’s vision of stronger regional development.
“There has been no sign of concern about GDP growth prospect from the authorities. In fact, Bangko Sentral ng Pilipinas seems to be more concerned about overheating risks in the near-term. The introduction of a new monetary framework by the central bank is aimed at lifting short-term market rates, presumably to mop out excess liquidity in the market,” it added.
With additional report from Agence France-Presse