The first-quarter growth of the Philippine economy beat all expectations and came as a very pleasant surprise following the lackluster growth in 2009 and given the slow recovery of the global economy.
As measured in terms of Gross Domestic Product (GDP), the total amount of goods and services produced by the country and excluding income from abroad, the Philippine economy grew by 7.3 percent. The National Economic and Development Authority (NEDA) says it was the highest quarterly GDP growth rate in three decades.
In addition, the National Statistical Coordination Board revised the GDP growth for 2009 from the earlier estimate of 0.9 percent to 1.1 percent.
Given the first-quarter economic performance, the government is now looking at raising the GDP growth target for the whole of 2010, from the current 2.6 percent to 3.6 percent. Even private rating agencies and financial institutions are revising their forecast for the Philippines.
Election-related spending really helped boost the economy, but not significantly. NEDA estimates spending by political parties and candidates contributed about 0.4 percent to GDP growth in the first quarter.
On the other hand, the industry sector posted an impressive turnaround from a negative growth of 2.6 percent in the first quarter of 2009 to a 15.7 percent growth in the first quarter of 2010.
The services sector, which grew by only 1.9 percent in the first three months of 2009, ended the first quarter of 2010 with a growth of 6.1 percent.
Understandably, only the agriculture, fishery and forestry sector posted a decline, by 2.5 percent in the first quarter of 2010, because of the damage wrought by typhoons Ondoy and Pepeng last year, which was followed by the El Niño phenomenon.
Overall, the economy ended the first quarter in a good shape. The major players in the business sector have also been reporting significant growth rates in revenues and profits.
Actually, other members of the Association of Southeast Asian Nations are also reporting high growth rates. Singapore grew by 15.5 percent in the first quarter, Thailand by 12 percent, Malaysia by 10.1 percent, Indonesia by 5.7 percent and Vietnam by 5.8 percent.
Among other neighboring countries, China’s economy grew by 11.9% Taiwan by 13.3 percent, Hong Kong by 8.2 percent and South Korea by 7.8 percent.
The challenge now is how to sustain the high growth rate throughout the year. Economists have been saying that the economy should grow by at least 7 percent a year for four years before its impact is felt by the poorest households. The Philippines grew by 7.1 percent in 2007 but slowed down to 3.8 percent in 2008 and to 1.1 percent last year.
The current global recovery and the resilience shown by the Philippine economy in 2009, while major economies plunged into recession, should keep the Philippines on the high growth track. In addition, the traditional “honeymoon” accorded to a new elected leader, plus the growing confidence of investors, are also expected to contribute to growth.
Business leaders and the government know what to do to keep the economy growing: make it competitive, by expanding and improving infrastructure and reducing the cost of doing business, among others.
These two measures alone will go a long way toward attracting more investments, generating employment and driving economic growth.