Growth in the Philippine economy likely got back on target in the second quarter of the year after veering off the desired range in the first three months, with the manufacturing sector contributing largely to the recovery, a government economist said.
The expansion of gross domestic product (GDP) in the second quarter may have settled at 7 percent, a significant recovery from the 5.7 percent recorded in the first quarter, he said.
The government is targeting 6.5 percent to 7.5 percent GDP growth for this year.
Department of Finance (DOF) Undersecretary and chief economist Gil Beltran said in a statement on Monday the last two quarters’ results of the Monthly Integrated Survey of Selected Industries (Missi) by the Philippine Statistics Authority (PSA) indicate a strong manufacturing industry.
Manufacturing accounts for 23 percent of the country’s gross domestic product (GDP).
The DOF economist explained that the sector may have added incremental 1.4 percentage points to 2 percentage points to real GDP growth in the second quarter.
“The rise in manufacturing growth from 4.3 percent (using Missi) or 6.8 percent (using the national income accounts) in Q1 to 13.0 percent in Q2 foreshadows a possible return to 7 percent real growth in Q2,” Beltran said.
Citing the PSA data, Beltran said manufacturing output in June increased by 13.3 percent from a year earlier after it grew 13.4 percent year-on-year in May.
Sales by the sector surged 24.1 percent, stepping up from 18.6 percent in May, while capacity utilization remained at 83.4 percent.
“Compared with the first quarter, production output in Q2 grew almost thrice the Q1 level while sales increased 1.5 times the Q1 growth. This means that the sector continued to draw down from inventory as in the first quarter. Replenishment of supply is necessary soon to avoid price increases,” Beltran said.
The Producer Price Index (PPI) eased further to -2.9 percent in June, implying that the sector continued to cut costs, enhancing its competitiveness.
Earlier, Philippine economic managers said they remained optimistic about the country’s growth prospects, but also wary of global and domestic risks that could potentially hamper sustainable growth.
They said the government remains on guard against domestic risks from natural disasters, excessive volatility in capital flows, possible spikes in consumer prices, and delays in infrastructure projects; as well as global risks such as the sustainability of the recovery in the euro area, US and Japan, geopolitical tensions in the Middle East and Ukraine, and further economic slowdown in large economies such as China and India.
Despite this, the economic managers said prospects in the remaining three quarters reporting period for the year look upbeat. Target growth for next year stands higher at between 7 percent and 8 percent in 2015.