The Philippine Online Chronicles

In the first quarter of 2010, the Philippines’s Gross Domestic Product (GDP) expanded by 7.3 percent, rebounding from a paltry 0.5 percent of the same period last year. The growth was widely unexpected and exceeded most forecasts.

The GDP is the sum of all goods and services produced and rendered within the Philippines during a given period.  The growth was broad-based with the industry and services sector offsetting the poor performance of the agriculture, fishery and forestry sector. The manufacturing, utilities and mining & quarrying subsectors grew by 15.7 percent in the first quarter. This was a reversal from the 2.6 percent contraction a year before.

On the other hand, the services sector, which includes the business process outsourcing sub-sector, continues to accelerate by expanding by 6.1 percent in the first quarter from 1.9 percent recorded a year ago.

Understandably, the El Nino phenomenon caused the agriculture, fishery and forestry sector to decline by 2.8 percent in the first quarter, reversing the growth of 2.1 percent a year ago.

The growth, the fastest since the 8.3 percent growth in the second quarter 2007, was largely attributed to the increased in consumer spending brought about by strong remittances and election spending. Government spending also helped in the over-all growth of the economy. The Government Consumption Expenditure (GCE) recorded the highest growth last quarter with an 18.5 percent increase from 6.5 percent last year.

As the world recovers from recession in 2009, Filipino workers continue to be in demand overseas. The money sent back home as remittances help in the creating domestic consumption. The total remittances for the first three months of this year amounted to USD4.3 Billion, up 7.7 percent from a year ago. As such, consumer spending expanded to 5.9 percent from 3.0 percent last year.

The demand was responsible for the 24.9 percent growth of the Net Factor Income from Abroad (NFIA). This pushed the Gross National Product (GNP) to expand by 9.5 percent from 3.3 percent last year. The increase was the highest growth since 1988.  The GNP includes the productions of Filipinos from abroad.

The recovery also benefitted the Philippine exports; rebounding along with neighboring countries from a dismal negative 14.6 percent last year to grow by 17.9 percent this year. The exports accounts for two fifths of the GDP.

Challenges moving forward

Threatening the growth is the persisting debt problems of Greece and the consequences it can bring to the Eurozone. Investors confidence in first world and emerging economies can be dampen if the issue is not resolved quickly. The La Nina can also pose risk to the AFF sub sector when the rainy season sets in.

For the government to sustain the growth, it needs to continue spending on infrastructures, education and social services. Hence, there is a need to improve tax collection to bring in revenues for the government. Otherwise, the Philippine’s budget deficit will continue to balloon.

Despite some analysts saying the growth would not be as fast in the succeeding months, the full-year target of 5.5 percent can be easily achieve.

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