Economy picks up in Q2

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Thursday, August 28, 2014

MANILA -- Local output in the second quarter, as measured by the gross domestic product (GDP), beat market expectations as the Philippine economy grew by 6.4 percent on the back of strong industry and services sectors.

This brings the first half growth to 6 percent after the economy slowed down to 5.6 percent during the January to March period, the National Economic and Development Authority (Neda) said Thursday.

Growth came in at 7.9 percent in the second quarter of 2013.

Reading from a statement, Socioeconomic Planning Secretary Arsenio Balisacan said in a press briefing that the economy is back on the higher trajectory of growth registered in 2012 and 2013, enough to keep the government optimistic of meeting the 2014 target of 6.5 to 7.5 percent.

"Expectations survey show that businesses maintain their positive outlook on the economy. However, we are aware that market players are still looking for more positive signals, in particular the public sector’s key role in infrastructure spending and consumption of nondurables," he said.

Administration senators recently challenged the government to speed up spending in the remaining months of the year after state consumption for the first quarter only hit 2 percent from 10 percent during the same period last year.

The Department of Budget and Management (DBM) blamed administrative bottlenecks for the anemic growth, Balisacan said, as some government agencies also needed to revise their work programs to increase service delivery in the areas ravaged by Yolanda, the world's strongest storm to hit land in 2013.

Balisacan also mentioned delayed submission of new requirements indicated in the national budget and ongoing validation of proposed programs under the controversial Grassroots Participatory Budgeting (GPB), which allots money for local projects such as potable water supply, agricultural infrastructure and facilities support and rural healthcare facilities.

He said the government has been addressing the problems, noting that disbursements in June increased by almost 45 percent and "we are confident that government will catch up on its work program for the year."

On the demand side of the economy, net exports contributed 4.2 percentage points and household consumption contributed 3.6 percentage points.

"This profile is in line with a more positive global economy, favorable business sentiment, and robust inflows of overseas Filipinos remittances," Balisacan said.

Except for the construction sector, which was affected by lower government spending, the supply side of the economy is on the upswing.

Agriculture grew by 3.6 percent, a rebound from 0.2 percent contraction in the second quarter last year.

This was due to the big turnaround in major crop harvests.

Industry grew by 7.8 percent, partly moderated by the weak performance of the construction industry.

Manufacturing accelerated to 10.8 percent in this period, buoyed by strong external demand and household final consumption.

The services sector expanded by 6 percent, mainly due to trade, real estate, renting and business activities, and transport, storage and communication.

"This was in response to the increased demand for business process management and the expansion of economic activities," Balisacan said.

The Philippines is the second fastest growing economy among major Asian countries for the period, matching Malaysia’s performance and topping other Southeast Asian neighbors such as Indonesia, which has 5.1 percent, and Thailand with 0.3 percent.

While the optimism in the domestic economy remains, the government is keeping an eye on inflation after "supply-side shocks" have pushed consumer prices to the upper bound of the inflation target of 3 to 5 percent, prompting the Monetary Board to raise policy rates to temper inflationary pressures.

The agriculture, fishery and forestry sector is seen to maintain its momentum in the coming months, Balisacan said, particular livestock and poultry due to increasing consumer demand as the holiday season approaches.

The industry sector is expected to accelerate in the second half of the year, led by manufacturing and the public construction subsectors, he added.

Growth of the construction industry meanwhile will be supported by the roll-out of public infrastructure projects, including public-private projects, the reconstruction assistance in the Visayas region, and the demand for more business and residential units.

Services will pick up pace due to higher demand by households, domestic industries, inbound tourists, and the strong external demand for business process management, Balisacan said. (Sunnex)

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