GDP grows 7.5% in 2nd quarter, highest in 20 years

http://www.mb.com.ph/BSNS20070831101650.html

By EDU LOPEZ

The Philippine economy, as measured by the gross domestic product (GDP), posted an impressive growth of 7.5 percent in the second quarter of the year, fuelled by industry and services sectors, the highest quarterly growth rate in 20 years.

"It is heartening to note the sustained strong performance of the economy in the second quarter, exceeding the forecasts by both NEDA and private firms," said Socioeconomic Planning Secretary Augusto Santos.

Gross national product (GNP) in the second quarter rose by 8.3 percent. GDP in the first semester of 2007 registered a strong 7.3 percent growth after an updated first quarter growth rate of 7.1 percent.

"The upbeat response of productive sectors further reinforced our macroeconomic fundamentals. While agriculture grew moderately at 3.9 percent, the distinct pick up in industry (8 percent) and services (8.4 percent) boosted the economy," said Santos.

The second quarter growth also reflects the continued stronger demand for labor, pushing the unemployment rate lower to 7.4 percent in the April labor force survey from 8.2 percent the year before.

On the demand-side, growth was stimulated by household and government consumption, which expanded by 6.0 and 13.5 percent, respectively.

Santos said capital formation also grew robustly at 8.2 percent compared to the 1.5 percent growth recorded in the same period last year. Merchandise exports however, slowed down to 5.9 percent from its double digit growth of 21.7 percent in the same period in 2006.

Palay production rose by 4.4 percent which remained healthy on account of increases in area harvested due to better irrigation and policy interventions such as the GMA rice program of the agriculture department. High value crops, fishery and forestry also supported the sector’s growth.

From a lackluster performance last year, the mining and quarrying sector sustained its growth in the first quarter.

Quarrying also got a boost from the surge in construction on account of the property market boom and strong growth in public construction (39.6 percent).

Almost all services subsectors have sustained growth, led by finance (11.8 percent), transportation, communication and storage (9.8 percent), private services (8.6 percent) and trade (8.4 percent).

Santos said the country’s sound macroeconomic fundamentals and strong corporate profits drove up the Philippine Stock Exchange Index (PSEI).

He noted that growth was seen as well in the higher earnings of banks and other financial services providers. Affordable airfares and intensive marketing promotions continued to prop up the air transport sector.

Santos is confident that NEDA’s full year official target of 6.1-6.7 percent GDP growth is quite attainable, notwithstanding some uncertainties.

On the external front, the continued weakness of the US economy and volatile oil prices continue to pose downside risks.

However, the steady economic expansion in Europe and Japan , as well as the fairly strong performance of other Asian economies, are positive developments, Santos said.

On the domestic front, Santos warned that the effects of the prolonged dryspell may drag the performance of agriculture in the second half.

"All these seem to say that the macroeconomic reforms implemented have been effective so far. With this positive development, we cannot afford to be complacent. We have to continually raise the bar to ensure the economy’s solid growth, so that economic gains increasingly benefit the Filipino people," said Santos.

Santos said that the government must push for policies to sustain macroeconomic stability, modernize agriculture and effectively transform it into agribusiness, strengthen small enterprises, expand export markets, protect our environment, and realign the national budget to spend more on social services, particularly education and health.