Rising fuel and food prices, a slowdown in the United States economy and the negative effects of a stronger peso slowed down the growth of Philippine economy in the first quarter to 5.2 percent from last year’s 7 percent, officials announced Thursday.

They said the figure is within the government’s expected growth range of 5.2-6.2 percent in Gross Domestic Product (GDP) for the first quarter.

“The external sector continues to struggle in an environment characterized by high oil prices and weak global demand,” Economic Planning Secretary Augusto Santos said Thursday.

The National Economic and Development Authority (NEDA) lowered yesterday the official economic growth target for 2008 from 6.3 to 7 percent to between 5.7-6.5 percent.

Gross National Product (GNP), meanwhile, expanded by 7.3 percent as a result of the 30.3 percent increase in the country’s net factor income from abroad (NFIA), 89 percent of which are remittances from overseas Filipino workers.

Service sector

Of all the sectors, the services sector remained the strongest and registered a 6.9 percent growth. The figure is lower than last year’s 8.4 percent growth and contributed to 3.3 percentage points in the GDP. Santos said the “healthy” growth was driven by real estate, finance and trade.

“The real estate sub-sector continues to be buoyed by demand for office space as well as residential spaces from OFWs,” Santos said.

Growth in the agriculture sector, which contributed 0.6 percentage points in the GDP, slowed down to 3 percent from last year’s 4 percent.

Santos said the higher output of palay, corn, banana, coconut and poultry and the increasing demand in agricultural-based exports drove the growth in this sector.

“The significant increase in the country’s agro-based exports particularly coconut, pineapple, coffee, rubber and seaweeds also helped prop up the sector,” he said.

Meanwhile, a decline in public construction and weak exports slowed down the growth of the industry sector from 3.9 percent from 6.9 percent registered in the same period last year.

Public construction fell to a negative 9.5 percent, down from 18.9 percent from the previous years. Similarly, total exports fell to negative 11.1 percent from 10.8 percent last year as a result of the slump in the economy of the United States, the Philippines major trading partner.

Mining posted the highest growth of 13.4 percent among the industry sub-sectors, followed by electricity and water, which registered a 10.4 percent.

High prices

The continued rise in prices also slowed down consumer spending to 5.1 percent from 5.9 percent a year ago.

“It indicates that families are saving a little bit,” Santos said. “It’s an era of high oil prices and as a result of global economic slowdown people are scrimping and tightening their belts.”

Santos said poor families would feel most the effect of economic slowdown. “Families who earn less than P10, 000 a month will be severely affected.”

Latest government statistics showed that around 4.67 million families or 27.6 million Filipinos are classified as poor.

Within expectations

Meanwhile, Finance Secretary Margarito Teves said the 5.2 percent GDP growth in the first quarter of the year was within expectations.

"The actual Q1 GDP growth of 5.2% is within government expectations for the quarter," Teves said in a text message to ABS-CBN News.

He said the government sees a higher growth in the next quarter due to increased expenditures on infrastructure and social services. He said these projects aim to help affected sectors cope with rising oil and food prices.

Teves also said that with the improved revenue from January to April, the government hopes to fund more projects in the coming months.

"We are also prepared to increase spending to achieve our revised growth target of between 5.7% and 6.5% this year," he said.

Below expectations

The first quarter GDP growth was sharply lower than the 7.4 percent growth in the last quarter of 2007 and well below market expectations.

A median estimate in an ABS-CBN poll of five economists earlier predicted a GDP growth of 6.13 percent in the first three months.

The economy grew a seasonally-adjusted 0.8 percent while gross national product (GNP) rose 2.1 percent in the first quarter.

US inflation

Rocketing inflation in the US, the Philippines' largest trading partner, has severely hurt demand for the country's exports and brought the economy back down to earth after it roared to its best performance in over three decades last year with expansion of 7.3 percent.

In a separate poll by Reuters, eleven economists had a median forecast of 6.2 percent for first quarter annual GDP growth.

"There will be downside disappointment," said Vishnu Varathan, an economist with Forecast Pte.

"The danger now is that consumer sentiment gets impaired by inflation despite robust remittances (from overseas)."

"Inflation unfortunately also undermines investment sentiment as well as portfolio flows and with the government having plans to up loans, there is always a fear that it 'crowds out' investments at a difficult time." – with reports from Reuters; ABS-CBN News (abs-cbnNEWS.com/Newsbreak)

RELATED READINGS:
» Statement of Socioeconomic Planning Secretary Augusto B. Santos on the Release of the First Quarter 2008 National Income Accounts
» RP growth brakes to 5.2 pct in Q1

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