4th Quarter 2007
PHILIPPINE ECONOMY SOARS TO 7.4% GDP GROWTH
Posted 31 January 2008
In an environment of benign inflation, low interest rates and a strong peso, the Philippine economy sustained its impressive streak of lofty growths that started in the first quarter of the year. Fourth quarter growth of GDP stood at 7.4 percent from 5.5 percent last year, propelled by the robust performances of Trade, Agriculture and Fishery, Private Services, Construction and TCS, with the rest of the sectors posting positive growths. On the demand side, increased household spending and investment in construction were the main drivers aided by the accelerated growths in government consumption, export of non-factor services and investment in durable equipment. The 3.0 percent contraction in the level of NFIA pulled down GNP to a lower growth of 6.5 percent compared to the GDP growth.
The seasonally adjusted GDP, now on its 27th quarter of positive growths, accelerated to 1.8 percent from 1.0 percent in the previous quarter. Likewise, the seasonally adjusted GNP, which has also been on positive territory since the second quarter of 2003, sped up to 1.4 percent from 0.9 percent in the third quarter.
On the production side, the sustained GDP growth in the fourth quarter was bolstered by the fast expanding Services sector whose growth of 9.0 percent from 8.4 percent in the same quarter last year is the highest since 1982. Likewise, Industry went up too at a higher pace of 5.8 percent from 3.6 percent the previous year, albeit slower than during the first three quarters, mainly because of the deceleration of Manufacturing. With favorable weather conditions during the quarter, Agriculture, Fishery and Forestry (AFF) also accelerated to 5.8 percent from its year ago rate of 1.7 percent.
The following were the contribution of the three major economic sectors to the GDP growth in the quarter: Services, with 4.4 percentage points; Industry, 1.8 percentage points and AFF contributing the least with 1.2 percentage points.
On a seasonally adjusted basis, AFF contracted by 0.1 percent in the fourth quarter after three quarters of robust growths while Industry rebounded to a 0.5 percent expansion after suffering a 0.4 percent contraction last quarter. The positive growth was attributed to the strong growths of Construction, Mining and Quarrying, and Electricity, Gas and Water. Services sector came in strongest as it posted an all time record growth of 3.3 percent. The phenomenal growth was brought about by the brisk retail trading during the fourth quarter combined with the strong performances of Private Services and Finance.
The economy continued to keep pace with the population growth in the fourth quarter of 2007 as per capita GDP grew by 5.3 percent from 3.4 percent, per capita GNP by 4.4 percent from 4.0 percent, and per capita PCE by 4.2 percent from 3.8 percent.
NFIA in the fourth quarter declined however, by 3.0 percent from a 12.4 percent gain in the same quarter last year as compensation inflow declined anew by an even higher rate of 3.3 percent from only 0.2 percent in the third quarter. This was aggravated by the deceleration in Property Income from 32.0 percent last year to 18.9 percent, and the growth in Property Expense by 4.4 percent. The fourth quarter recorded the first quarter of negative growth of NFIA since the fourth quarter of 2002.
On the expenditure side, consumer spending grew by 6.3 percent from 5.8 percent a year ago. Food expenditure, which accounted for 56.1 percent of the Personal Consumption Expenditure (PCE), grew by 6.6 percent from 6.8 percent in the previous year while Miscellaneous expenditures accelerated to 7.8 percent from 5.7 percent last year. Meanwhile, Transportation/Communication and Clothing & Footwear both turned in lower growths as they decelerated to 8.2 percent from 8.3 percent and 2.4 percent from 6.5 percent, respectively. The other sub-sectors that contributed to the growth of PCE were the following: Household Operations, up by 2.7 percent from 1.9 percent; Beverages grew by 4.7 percent from 6.6 percent; Fuel, Light & Water, up by 4.3 percent from 1.4 percent; and Household Furnishings, which recovered from a negative 2.5 percent growth last year to positive 5.0 percent this year.
Government Consumption Expenditure (GCE) accelerated to 10.8 percent from a growth of 9.9 percent last year with the disbursement of government funds for infrastructure project.
Investments in Fixed Capital Formation expanded by 10.3 percent from last year’s growth of 2.2 percent on account of vigorous investments in construction. Construction grew by 17.6 percent from 5.7 percent with the hike in national government’s capital expenditures and capital transfer to LGU’s resulting in the 33.4 percent growth in public construction from 39.6 percent in the previous year. On the other hand, investments in private construction rebounded to 7.4 percent from negative 8.7 percent in 2006. Meanwhile, Durable Equipment sustained a positive growth of 4.9 percent from negative 0.5 percent in the same period last year.
Reeling from the crisis faced by the US economy, total Merchandise Exports skidded to negative 3.7 percent from a growth of 2.2 percent in the same quarter last year.
The top five Merchandise Exports were: Finished Electrical Machinery, which bounced back to a 19.5 percent gain from a 14.0 percent decline; Crude Coconut Oil, which recovered from negative 39.7 percent to positive 9.6 percent; Semiconductors and Electric Microcircuits, which expanded to 1.7 percent from negative 4.3 percent; Canned Pineapple, which rebounded to 29.3 percent from negative 7.3 percent; and Prepared Tuna, which grew by 69.1 percent from 48.9 percent. Exports of Non-Factor Services, on the other hand, accelerated to 6.4 percent from 2.9 percent in the previous year.
Total Merchandise Imports, which has been on a downhill since the first quarter of the year, continued to shrink by 3.2 percent in the fourth quarter from last year’s 0.3 percent growth.
Only three subsectors contributed positively to the growth of Merchandise Imports: Cereals and Cereals Products, with a hefty growth of 96.4 percent from a measly 0.8 percent last year; Mineral Fuels, Lubricants and Related Materials, up anew by 7.6 percent from 11.1 percent; and Dairy Products, which accelerated to 10.8 percent from 9.9 percent. On the other hand, imports of non-factor services slowed down to 11.1 percent from 17.6 percent due to the lackluster performance of Miscellaneous Services, which contracted by 0.4 percent from a 17.4 percent gain last year.
The terms of trade during the quarter resulted in a Trade Index of 104.2 percent from 109.2 percent in the same period last year. Trading Gains for the quarter amounted to P6.1 billion.
GNP Implicit Price Index (IPIN) stood at 497.1 from 478.6 in the previous year or a 3.79 percent inflation from 2006.
ROMULO A. VIROLA