Economy Grew 7.3% in 2007, Fastest in 31 YearsPosted March 19, 2008
MANILA, Philippines -- Surpassing expectations, the Philippine economy as measured by the gross domestic product (GDP) grew 7.3 percent in 2007, its best performance in more than three decades.
"As expected, the 7.3 percent full-year output expansion exceeded market expectations and is so far the strongest since the economy registered its peak of 8.8 percent in 1976," said Augusto Santos, acting director general of the National Economic and Development Authority (NEDA).
The growth was well above the government's target of 6.1-6.7 percent and beat most forecasts by private sector economists. In 2006 the growth rate was 5.4 percent.
The high growth is expected to place the Philippines among the top five fastest-growing economies in Asia for 2007, the NEDA said. Neighboring countries have yet to announce their 2007 economic results.
The gross national product (GNP) -- the GDP plus net factor income from abroad, which covers money remittances from overseas Filipino workers -- grew 7.8 percent, the fastest rate since 1977.
Santos said the robust growth was broad-based, as all major sectors of the economy recorded faster expansion.
The agriculture, fisheries and forestry sector rose 5.1 percent last year, compared with 3.8 percent in 2006. The industry sector grew 6.6 percent (from 4.5 percent in 2006), and the services sector expanded 8.7 percent (from 6.7 percent in 2006).
The corn sub-sector grew 10.8 percent, banana 10.1 percent, and forestry 12.2 percent.
In the industry sector, mining and quarrying grew 25.0 percent, after a drop of 6.1 percent in 2006.
The growth in mining "is an indication that the government's effort to revive the mining industry is bearing fruit," Santos said in a statement.
Construction grew 19.6 percent, compared with 7.3 percent in 2006.
The services sector rose 8.7 percent. This sector, which includes the booming business process outsourcing sub-sector, had its fastest growth since 1987.
Almost all services sub-sectors registered faster growth: transportation and communications, 8.2 percent (compared with 6.3 percent in 2006); trade, 9.8 percent (6.1 percent in 2006), finance, 12.3 percent (11.4 percent in 2006); real estate, 6.0 percent (5.7 percent in 2006); private services, 8.8 percent (6.9 percent in 2006). Only government services registered a slowdown to 3.3 percent from 4.7 percent in 2006.
Government consumption, which pumped-prime the economy, grew 10.0 percent, the fastest pace since 1974, the NEDA said.
Economic officials said the government's improving revenue generation allowed it to spend more on social services and infrastructure.
The government raised P90 billion from the sale of assets last year, which helped it stay within its financial target for 2007 despite a shortfall in tax collection.
The government aimed to limit the budget deficit at P63 billion last year; but the Department of Finance has said the result will likely be a "small deficit" because of increased revenues. The budget deficit data are to be released next month.
Money remitted through banks by overseas Filipino workers (OFWs) rose to an all-time high of $13 billion in the period from January to November, according to the latest available data.
The NEDA said money sent by OFWs to their families reached P759.3 billion last year, up 7.4 percent from P706.9 billion in 2006.
The negative factor from overseas is the possibility of a US recession this year, which will hurt the Philippine economy.
Recession is defined as two consecutive quarters of decline in the GDP.
The United States accounts for 16-19 percent of Philippine exports.
A one-percentage-point drop in the GDP of the United States would result in a decrease of 1.76 percentage points in the GNP growth of the Philippines, according to NEDA estimates.
The US is also the biggest source of OFW remittances, and is where most clients of call centers and other business process outsourcing operations in the Philippines are based.
Rising international oil prices and the strengthening of the peso -- which reduces the peso equivalent of dollar remittances -- will also adversely affect household spending, Santos said.
Finance Secretary Margarito Teves said,"The administration is committed to doing whatever it can to ease the burden imposed on Filipinos by the strong peso, volatile international energy prices, and a potential global economic slowdown.
Doubt on data
Benjamin Diokno, an economics professor at the University of the Philippines and former budget secretary, said it was unlikely that agricultural growth accelerated in 2007 after farm production was hit by drought.
Diokno also said imports were likely understated, because a lot of products were smuggled into the country. Earnings from exports minus spending for imports are part of the GDP computation.
The NEDA said imports contracted by 6.6 percent last year, while exports grew by 2.0ercent.
Diokno said a more believable GDP growth figure for 2007 was between 6.0 and 6.5 percent.
For 2008, Diokno said it would be difficult to sustain the 2007 growth because of the ill effects of the strong peso, restrained government spending, and slower exports.
He said GDP growth this year could reach only 5.0-5.5 percent.
Source: inquirer.net, Feb 1, 2008