Philippine economy grows 3.4% in 2nd quarter

The Philippine economy posted a modest growth of 3.4 percent in the second quarter of 2011.

Socio-economic Planning Sec. Cayetano Paderanga, Jr. said the growth was below the government’s
forecast of 4.5 to 5.5 percent, the private analysts’ average projection of 4.9 percent and some international organizations’ average outlook of 5 percent in the second quarter.

Paderanga noted that growth was driven by the strong rebound of the agriculture sector (7.1%), particularly sugarcane, palay, and corn, and the modest expansion of the services sector, primarily financial
intermediation, real estate, renting and business activities, and other services subsectors.

On the expenditure-side, growth was spurred by household and government consumption, constrained by surges in world oil prices, triple disasters in Japan, the slow recovery of the US and European economies, the
social unrest in the Middle East and North Africa (MENA) region, and adverse weather conditions, which negatively affected the fishing subsector.

Paderanga stressed that the second quarter growth in 2011 was expected to have been lower than the growth in the same period last year due to tapering off of the base effect and the absence of growth drivers in the second quarter of 2010, such as election-related spending and the stronger than expected
global economic recovery.

He noted that the 2.8 percent contraction in net primary income mainly due to the lower net compensation as overseas Filipinos (OF) remittances grew by only 1.4 percent in peso terms, resulted in a 1.9 percent growth in gross national income (GNI).

With a second quarter gross domestic product (GDP) growth of 3.4 percent and a revised first quarter GDP growth of 4.6 percent, the first semester GDP growth for this year is 4 percent.

To attain the 7 to 8 percent growth target for 2011, the economy needs to grow by at least 10.0 percent in the second semester, said Paderanga.

Paderanga is optimistic that prospects for the second half of 2011 are better than the first half’s performance.

He expects agriculture production will be supported by the strong prospect for palay production.

The Bureau of Agriculture Statistics has projected a 6.2 percent  growth for palay in the second half of 2011.

Sec. Paderanga said the manufacturing sector would be buoyed by the food manufactures, while  real estate and private construction would continue to remain upbeat given the bright prospects in the property market particularly the office, residential, retail and hotel-leisure submarkets.

“Other services and trade will be supported by inbound tourists, the number of which is expected to rise, on the average, by 6.3 percent in 2011.  Mining is expected to benefit further from high metal prices in the world market.”

Business sentiment has improved in the third quarter of 2011 as public construction and government services are likely to pick-up due to the accelerated spending plan of government, said Paderanga.

On the demand side, Paderanga expects household consumption and investment will remain as the growth drivers.

“Household consumption will get a boost from the employment creation program, the continuing implementation of the conditional cash transfer program for the lower income deciles, the modest inflow of remittances, and the still well-anchored inflation expectations.”

“Investments will continue to register positive increases given the bright outlook in the expansion plans of firms across the industry subsectors,” he added.

Romulo Virola,  director-general of the National Statistical Coordination Board (NSCB)  noted that the 3.4 percent growth in the second quarter of 2011 was less  than half the booming 8.9 percent growth in

He partly attributed the modest growth to the fragile recovery of the Philippine trading partners and the European debt crisis which affected most economies.