Philippine economy grows 6.4% in 2nd quarter 2014

The Philippine economy as measured by gross domestic product (GDP) grew by 6.4 percent in the second quarter of 2014.
Socio-economic Planning Sec. Arsenio Balisacan said the higher growth rate, coming from a high base a year ago showed that the economy is back on the higher trajectory registered in 2012 and 2013.
“We remain as one of the bright spots in the region, the second fastest growing economy among major Asian countries for the period, tied with Malaysia’s performance and topping other major ASEAN countries such as Indonesia, which has 5.1 percent, and Thailand with 0.3 percent,” said Balisacan.
On the demand-side, net exports contributed 4.2 percentage points and household consumption contributed 3.6 percentage points. 
“This profile is in line with a more positive global economy, favorable business sentiment, and robust inflows of overseas Filipinos remittances,” said Balisacan.
He noted that most sectors of the economy demonstrated strong growth, except for the construction sector. Agriculture grew by 3.6 percent, a rebound from 0.2 percent contraction in the second quarter last year due to the big turnaround in major crop harvests.
Industry grew by 7.8 percent, partly moderated by the weak performance of the construction industry. Although private construction increased by 12.7 percent during the second quarter compared to last year, public construction reversed last year’s strong growth and recorded a significant reduction in the second quarter, said Balisacan.
The gross value-added in manufacturing accelerated to 10.8 percent, buoyed by strong external demand and household final consumption.
The services sector expanded by 6 percent, mainly due to trade, real estate, renting and business activities, and transport, storage and communication.  This was attributed to the increased demand for business process management and the expansion of economic activities.
Balisacan said that on the demand-side, the strong household spending in the second quarter of 2014 reflected the still upbeat consumer sentiment in the country.
However, the slowdown in disbursements in personal services and maintenance and other operating expenditures (MOOE) led to the nil growth in government consumption.
According to the Department of Budget and Management, the slower spending was partly due to administrative bottlenecks as some government agencies also needed to revise their work programs to increase service delivery in the Yolanda-affected areas. 
For instance, the Department of Health had to prioritize deployment of its personnel to render primary health care in the Yolanda-affected areas. 
Balisacan explained that the decline in public construction was the result of lower spending in infrastructure and other capital outlays particularly in the months of April and May 2014 as major government agencies posted lower-than-programmed disbursements.
“We have already identified the reasons for this under-performance such as the delayed submission of new requirements indicated in the General Appropriations Act (GAA), ongoing validation of proposed programs under the Grassroots Participatory Budgeting and the revision of work programs to respond to the reconstruction needs in the Yolanda-affected areas.”
Balisacan expects the country is likely to achieve the full-year growth target of 6.5 to 7.5 percent.  Expectations survey showed that businesses maintain their positive outlook on the economy. 
“However, we are aware that market players are still looking for more positive signals, in particular the public sector’s key role in infrastructure spending and consumption of non-durables,” said Balisacan.
NEDA has identified the administrative bottlenecks that contributed to the underperformance of the government sector and are being addressed.  “Disbursements in June increased by almost 45 percent and we are confident that government will catch up on its work program for the year,” he added.
“While the optimism in the domestic economy remains, we remain vigilant against factors that could temper our growth prospects.”
Balisacan said the supply-side shocks have pushed headline inflation to the upper bound of the inflation target, prompting the Monetary Board to raise policy rates to temper inflationary pressures. 
Balisacan said the agriculture, fishery and forestry sector is seen to maintain its momentum pasticularly livestock and poultry due to increasing consumer demand as the holiday season approaches.
He expects the industry sector to accelerate in the second half of the year, led by manufacturing and the public construction subsectors.
“The manufacturing sector also remains upbeat as indicated by its double-digit growth. The sector is expected to gain from the positive outlook for exports and the increasing interest of foreign firms to set up operations in the country,” he said.
Balisacan is confident that growth of the construction industry will be supported by the roll-out of public infrastructure projects, including public-private partnership (PPP) projects, the reconstruction assistance in the Visayas region and the demand for more business and residential units.
He also expects services would continue to grow primarily in response to higher demand by households, domestic industries, inbound tourists, and the strong external demand for business process management.
Balisacan reiterated that while underspending in the second quarter was a cause for concern, the government is taking the right steps to address bottlenecks in the implementation of critical programs particularly key infrastructure projects.(EHL)