First published: 11:20 a.m., May 30, 2013 | Updated 6:05 p.m., May 30, 2013
By Katrina Domingo
The Philippine economy grew at a robust 7.8 percent rate in the first quarter of 2013, the highest under the Aquino administration so far and the highest among Southeast Asian economies.
Indonesia placed second with six percent growth, followed by Thailand at 5.3 percent and Vietnam at 4.9 percent.
The country's first quarter gross domestic product (GDP) surpassed China's 7.7 percent growth.
This quarter's growth rate is by far the highest under the Aquino administration.
The National Statistical Coordination Board (NSCB) said on Thursday that the powerhouse was the industry sector that achieved growth of 10.9 percent this quarter compared to 8.9 percent in the last quarter of 2012.
Construction and manufacturing were the driving forces of growth.
Meantime, growth in the services sector is at seven percent, half a notch higher than last quarter's 6.5 percent.
NSCB data showed that the financial intermediation and trade services are the best performers.
The agriculture, hunting, fisheries and foresting sector expanded 3.3 percent last quarter, 1.6 percent lower than the last quarter of 2013.
The NSCB said increased government and consumer spending as well as increased investments in construction and durable equipment also led the economy's growth.
NSCB data showed imports and exports pushed last quarter's growth.
Top export goods include metal components, control instrumentation, automotive electronics, coconut oil, and sugar.
The bottom five exported goods include semiconductors, electronic data processing, apparel and accessories, consumer electronics, and communication radars.
As for imported goods, communication equipment, textile yarns, transport equipment, mechanical appliances and base metals top the list.
The least imported products were semiconductors, electronic data processing equipment, mineral fuels, chemical products, and artificial resins.
Remittances from overseas workers pushed the gross national income from to 5.7 percent in the last quarter of 2012 to 7.1 percent last quarter.
Despite robust growth, the NSBC said that the economy is less likely to overheat as inflation remains stable.
The stellar pace of expansion, which blew past expectations, pulled the peso up from an 11-month low and cemented views the central bank would leave its key policy rate on hold this year.
Growth is seen powering on after the Philippines earlier this month got an investment grade rating from Standard & Poor's, the second debt agency to do so this year. That lowers borrowing costs and helps to attract foreign capital for an economy mired with high unemployment and poverty.
First quarter GDP grew a seasonally adjusted 2.2 percent over the prior three months, the fastest clip since the first quarter of 2012. A Reuters poll of economists had forecast 1.6 percent growth.
From a year earlier, the economy grew 7.8 percent, helped by robust domestic spending, making the Philippines the fastest growing economy in Asia as it pushed past China's 7.7 percent annual pace and 1.6 percent quarterly growth.
The Philippines' year-on-year GDP figure also topped the 6.1 percent growth forecast in a Reuters poll and was the fastest since the second quarter of 2010, then boosted by spending related to national elections that put President Benigno Aquino in power.
"We may now be moving along a new growth trajectory," Socioeconomic Planning Secretary Arsenio Balisacan, director general of the National Economic Development Authority, told reporters.
Capital formation jumped an annual 47.7 percent in the first quarter as the private sector invested heavily to expand capacity given strong domestic consumption.
Public construction climbed 45.6 percent as a faster budget roll-out and better fiscal position allowed for more spending to rehabilitate decrepit school buildings, roads and bridges.
Per capita GDP grew an annual 6.1 percent in the first quarter, the highest in at least two years, although unemployment was at a year-high of 7.1 percent as of March.
With a fast-growing population, estimated at 96.8 million as of March, job creation can't keep pace with the around one million new entrants to the job market every year, Balisacan said.
The challenge was to create more broad-based growth so that the poorer sectors of society could benefit from jobs in high growth sectors, he added.
Bernard Aw, analyst at Forecastweb in Singapore said the Philippines' improved risk and debt profile would help shield the peso from external vagaries.
The export-reliant Philippines is facing some risk that demand for its high-tech products will slow on more evidence that the recovery in global growth is losing momentum.
But the global slowdown had little impact on manufacturing. Data showed the sector grew an annual 9.7 percent in the first quarter on domestic demand for food items, household appliances, chemicals, and communication, transport and machinery equipment.
Market reaction was mixed. While the peso was up at 42.28 per dollar, the local stock market slid as much as 3.4 percent in line with sharp declines in regional bourses.
Rates seen on hold
At a time when several regional central banks have cut rates to bolster growth, economists said the Philippine central bank would most likely leave its key overnight borrowing rate on hold for the rest of the year. Inflation is forecast to stay within the central bank's 3 to 5 percent target band this year despite strong growth.
Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco said he did not foresee the inflation target being breached over the policy horizon despite strong GDP growth.
The central bank next meets to review policy on June 13. It has kept its policy rate steady at a record low of 3.5 percent since December 2012, but has slashed the rate on its special deposit account (SDA) facility by more than 200 basis points since July 2012 to divert credit to more productive use.
"We think the BSP will continue to cut the SDA rate to lift domestic spending as well as save costs," said Trinh Nguyen, economist at HSBC in Hong Kong. The central bank has incurred heavy losses as the SDA facility attracted huge liquidity.
With the outlook on exports still murky, domestic consumption will remain as the main driver for economic growth this year. Manila is targeting growth of 6 percent to 7 percent in 2013 after an upwardly revised 6.8 percent expansion the prior year. (With a report from Reuters)
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