The Philippines is attracting more foreign investors as the domestic economy has sustained its growth momentum as the gross domestic product (GDP) grew by 6.6 percent in 2012 and posts a 6.8 percent growth in the fourth quarter of last year. The equities market is soaring new highs, reflecting positive confidence from foreign fund managers under the Aquino government.
The growth was fuelled by the robust performance of the services sector led by trade and real estate, manufacturing and construction as well as renting and business activities.
Socio-economic Planning Sec. Arsenio Balisacan said the 6.6 percent growth last year surpassed the 5 to 6 percent target set by the Development Budget Coordination Committee (DBCC).
On the supply side, all sectors performed beyond expectations led by industry, then services and even agriculture.
Industry grew by an impressive 6.5 percent, more than twice the growth exhibited in 2011 at 2.3 percent, led by the expansion in public and private construction activities and the electricity, gas and water sector.
Balisacan noted that in the first two quarters of 2012, it was public construction that took up the slack in construction but the private sector has taken over beginning the third quarter.
“This is what we mean by the private sector upping its stakes in the economy. Equally remarkable was the growth in the electricity, gas and water sector, growing by 5.1 percent, a far cry from its growth of 0.6 percent in 2011. No doubt this was in support of the increased economic activity in 2012.”
The service sector also defied expectations growing at 7.4 percent mainly contributed by trade, transport and communication and real estate, renting and business activities, and other services.
Trade grew by 7.5 percent in 2012, more than twice the growth in 2011. Similarly, growth in transport and communication accelerated more than twice, at 9.1 percent compared to 4.3 the previous year.
“We had expected a slower growth for the real estate, renting and business activities, which includes the IT-BPO, owing to the continued slowdown in the global economy. And yet the sector still managed to grow faster than expected at close to 8 percent,” said Balisacan.
He also noted gains in other services particularly tourism-related subsectors, such as hotels and restaurants, and recreational, cultural and sporting activities. These subsectors grew by 13.3 percent, compared to only 7.1 percent in 2011.
The agriculture sector defied expectations, growing by 2.7 percent. “We only expected a 2.2 percent growth from the sector owing to weather disturbances forecast for the year.”
“In the first two quarters of 2012, it even looked like the sector would under-perform, weighed down by the contraction in the fisheries sector. However, the turnaround happened beginning the third quarter and especially in the fourth quarter when the sector grew by 4.7 percent.”
Growth in the fishery sector had gone up by 3.3 percent, from eight consecutive quarters of contraction if not stagnant growth.
On the demand side, household consumption expenditure together with government spending, the recovery of capital formation and the remarkable performance of the external trade contributed to the robust growth of the economy in 2012.
Household consumption remained the largest contributor to growth in 2012, growing by 6.1 percent. The growth has been supported by the higher level of economic activity, low and stable inflation, inflows of overseas Filipinos’ remittances and the conditional cash transfers program.
Exports of goods recovered with a growth of 8.7 percent for the year from a contraction of 4.2 percent in 2011. Exports of services grew by a remarkable 9.8 percent, more than twice the growth the previous year.
Fixed capital formation also improved to 8.7 percent in 2012 as growth in investments for public and private construction, and durable equipment registered significant increases.
Sec. Balisacan stressed that the government would put in place policies and implement programs that will sustain the economy’s growth over the medium term.
“We will continue planting the seeds of a structural transformation in our economy to make it more investment and industry-led. This will mean more jobs and employment opportunities of high quality for Filipinos, thus ensuring that growth is inclusive and benefits all sectors of society.”
In attracting more investments and pursuing industrialization, the government is serious in addressing the country’s energy requirements, especially in the Visayas and Mindanao, said Balisacan.
“The objectives of the energy sector are to raise energy capacity, achieve a reliable and adequate supply of electric power, and expand rural electrification in the country. We should ensure that power supply is sufficient to support the anticipated expansion in investment.”
He pointed out that the importance of harmonizing policies and guidelines among concerned agencies on the exploration, development, utilization and conservation of natural resources for energy projects.
“Through governance reforms, we have tightened our mechanisms towards strengthening think between policy making and investment programming.”
“As the national blueprint for inclusive growth, the Philippine Development Plan for 2011-2016 has guided national government agencies in crafting and implementing their respective sectoral initiatives.”
The thrust now is to ensure that local and regional plans are in sync with the government’s strategies in achieving continued economic growth and a significant reduction of poverty, said Balisacan.
On the impact of a stronger peso on the competitiveness of business process outsourcing and exports sectors, the profitability of local production over imports, as well as the purchasing power of the earnings of overseas Filipinos, Balisacan assured that the economic managers are talking with each other about how best to address this issue.
“We continue to remain vigilant of the global and domestic risks to growth such as the possibility of oil price increases due to a higher global demand for petroleum products and the Euro area which is a major concern,” Balisacan said.
The agriculture sector is seen to be more vibrant in 2013, even if it is highly vulnerable to weather disturbances.
“Part of the costs of the widespread flooding and landslide and extensive damage to agriculture brought by Pablo in the last quarter of 2012 will continue to be felt in the first quarter of 2013.”
Given the vibrant economic performance, Balisacan believes that the growth targets for 2013 to 2016 are realistic.
“The crucial issue is the implementation of appropriate policies and measures to ensure that we will sustain this high growth and make it inclusive in the medium term,” he added.