RP growth surges to 7.9% – officials

Aug 27, 2010
MANILA – The Philippine economy surged by 7.9 percent on the back of the credible elections in May, improved investor confidence, increased capital expenditure by government, and the global economic recovery. Officials said that in the first quarter, growth was initially expected at 7 percent, an expansion that analysts found “surprising.” The actual rate was 7.8 percent, according to the National Statistical Coordinating Board in a Malaya report.

Romulo Virola, NSCB secretary general, said the second quarter growth is the highest since the second quarter of 2007. It exceeded the government’s expectation of 5.9 to 6.9 percent. Virola said the first semester growth was 7.9 percent, the highest since the second semester of 1988’s 9.3 percent. The Bangko Sentral ng Pilipinas (BSP) readily allayed fears of spike in inflation this year and next year as outlook for the rate of price increases remains benign. This even as the domestic economy posted even higher output of 7.9 percent in the second quarter this year from year-ago’s 1.2 percent and quarter-ago’s revised 7.8 percent. BSP Governor Amando Tetangco Jr. said this development “is not expected to cause a significant increase in inflation in 2010 and 2011.” “Our forecasts still indicate a well withintarget inflation outlook for these two years,” he said.

The government’s inflation target for this year is 3.5-5.5 percent while next year’s target is three to five percent. BSP projects inflation to average at four percent this year and 3.25 percent next year. As of last July, rate of price increases stood at 3.9 percent, same as the previous month’s figure.

Monetary officials said inflation continued to be benign but admitted that upside risks remained. These upside risks include petitions for electricity rates, higher growth of the domestic economy as well as higher toll fee and fare hikes in Metro Rail Transit (MRT) and Light Rail Transit (LRT). BSP Deputy Governor Diwa Guinigundo said that amid the risks, the forecast remained below the mid-point of the inflation targets for this year and next.

“Even as it (inflation) increases, it would be gradual and can still be accommodated and will stay within target,” he said. Virola said the surge was the first in six years that the country experienced two consecutive quarterly growth of more than 7 percent. The last time this was experienced was in 2004, with 7.2 in the first quarter and 7.1 percent in the second quarter. Virola said that for the second quarter, the industry sector was the main driver of growth. It grew by 15.8 percent compared to the negative growth of 0.6 percent in the same period last year.

“Manufacturing sustained its first quarter production in response to the improved domestic and external demand, and was shored up by construction, trade, and mining and quarrying,” Virola said. The services sector also posted a strong growth rate of 6.4 percent, from the second quarter of 2009’s 2.7 percent. “Growth in the services sector was led by trade, private services, and ownership of dwellings and real estate due to improved market sentiment, continued recovery in the global economy, and election-related spending,” said Planning Secretary Cayetano Paderanga Jr.

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