ECONOMY POSTS HIGHEST GROWTH IN 20 YEARS
MANILA, AUGUST 31, 2007 (STAR) By Marvin Sy - The economy grew by 7.5 percent in the second quarter, the fastest rate in 20 years as government spending and private consumption boomed, President Arroyo announced yesterday.
“Our economic plan is working. Today we have the latest glowing indicators to show it,” a beaming Mrs. Arroyo told a nationally televised news conference on the better-than-expected data.
The second quarter gross domestic product (GDP) growth of 7.5 percent beat a market forecast of 6.5 percent and took the first half performance to a galloping 7.3 percent, among the highest in the region, encouraging officials to speculate that a seven-percent growth is not impossible for the year.
Mrs Arroyo said gross national product (GNP), which includes income from abroad, rose 8.3 percent for the second quarter from a year ago.
First-quarter economic growth, excluding the overseas income, was revised upward to 7.1 percent from the original 6.9 percent, pushing first-half GDP to an average 7.3 percent from a year ago, she added.
“We’re confident of meeting our full year growth forecast of 6.1 percent to 6.7 percent,” Mrs. Arroyo said.
The Philippines has defied expectations by increasing revenues, cracking down on tax cheats, strengthening the peso, boosting the stock market, balancing the budget, prepaying its debts and creating more jobs, the President said.
The services sector remained the economy’s linchpin, registering a strong growth of 8.4 percent, while industry posted an eight percent growth, said Estrella Domingo, secretary general of the National Statistical Coordination Board.
Mrs. Arroyo said newfound money for investment has allowed the economy to increase its growth pace.
“While our economy has reached a new level of maturity and stability with one of the strongest macro-economic fundamentals in two decades, we should not rest, but push forward and sustain the momentum,” she said.
The President said revenue and deficit targets must be achieved to maintain investor and creditor confidence and keep the flow of low-interest capital strong.
Tax and customs agencies must hit their targets, she said, and business concerns over power costs and red tape must be addressed, while investments in small and medium industries, tourism and infrastructure must be intensified.
For his part, Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr said the second quarter economic growth performance gave the Monetary Board the confidence that the economy would grow within the target of 6 .1 and 6.7 percent in 2007.
“The good combination of strong economic growth coupled with manageable inflation is consistent with the maintenance of our neutral policy stance at this point,“ Tetangco said. “At the end of the day, our fundamentals will see us through,“ Tetangco added, referring to the fallout from the subprime crisis in the US.
Overall, the construction industry posted a growth rate of 21 percent for the second quarter, up from the four percent expansion in 2006.
Another industry that registered remarkable growth during the period was mining and quarrying with a double-digit growth rate of 33.3 percent from just 3.3 percent a year ago.
“Ours is the only administration that has not experienced any negative growth in any quarter. And it has been a six year administration. So it has been sustained. In fact, the regular boom and bust cycle is three years so we should have gone through two boom and bust cycles by now but we never did,” Mrs Arroyo said. .
For the second half of the year, the President’s economic team expressed confidence that there would be no slowdown and that the full year GDP target would be attained.
Acting Socioeconomic Planning Secretary Augusto Santos said that the second quarter growth indicates that the 6.1 to 6.7 percent full year growth target is attainable notwithstanding some possible uncertainties.
He noted that the continued weakness of the US economy as well as the volatile oil prices would continue to pose a downside risk.
On the other hand, he argued that the steady economic expansion in Europe and Japan as well as the fairly strong performance of other Asian economies are positive developments for the Philippine economy.
Agriculture, which traditionally is a major contributor to GDP, grew by a slower pace, expanding by only 3.5 percent, according to Santos.
Palay and corn in particular, grew by just 4.4 percent and negative 2.5 percent respectively from 10.3 percent and 49.2 percent over the same period in 2006.
“Effects of the prolonged dry spell may possibly drag the performance of agriculture in the second half but we expect a recovery in the second half,” Santos said.
Merchandise exports were also down, growing by just 5.5 percent in the second quarter from 21.7 percent over the previous year.
Santos also noted that the second quarter growth reflects stronger demand for labor and consequently pushed the unemployment rate lower to 7.4 percent in the April labor force survey from 8.2 percent during the same period last year.
“All of this would seem to say the macroeconomic reforms implemented have been effective so far. But with the positive development, we cannot afford to be complacent. We have to continually raise the bar to ensure the country’s solid growth so that economic gains increasingly benefit Filipino people,” Santos said.
He said the government must push for policies to sustain macroeconomic stability, modernize agriculture and effectively transform it into agri-business.
The government would also focus on strengthening small enterprises, expanding export markets, protecting the environment and realign the national budget to spend more on social services, particularly education and health.
“The government must implement reforms to improve productivity and boost the investment climate- this involves upgrading infrastructure, cutting lose from policies that distort market competition, sustaining fiscal reforms and achieving political stability,” Santos said.
“We need to speed up the pace of implementing key reforms to ensure increase in growth over the medium term,” he added.
Trade Secretary Peter Favila, for his part, said that the second quarter performance “only shows that business has ignored politics.”
Roger Dallas, president of the American Chamber of Commerce, said that the continued growth of the Philippine economy is what many American industries and companies looked at and considered in their decision to invest in the country.
The country’s second-quarter GDP performance outshone neighbors such as Malaysia, Hong Kong and Indonesia but trailed Singapore’s 8.6 percent and China’s 11.9 percent. It was the highest annual growth rate since the 7.7 percent growth rate recorded in the third quarter of 1986. – With a report from Des Ferriols
Chief News Editor: Sol Jose Vanzi
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