Manila (Philippine Daily Inquirer/ANN) - Living up to President Benigno Aquino III's advance information that the numbers would impress, the Philippine economy expanded 6.8 per cent in the fourth quarter of 2012, lifting full-year growth to 6.6 per cent.
The figures that government economists and statisticians announced Thursday beat their targets and analysts' expectations.
Socioeconomic Planning Secretary Arsenio M. Balisacan said that on hindsight, the government's 5- to 6-per cent growth target for the past year seemed conservative.
Median forecasts from the World Bank and other institutions were 5.9 per cent for the fourth quarter and 6.4 per cent for the full year.
Compared with the latest available data from other Asean countries, the Philippines' fourth quarter growth in gross domestic product (GDP), the value of goods produced and services rendered in a given period, was higher than Vietnam's 5.4 per cent and Singapore's 1.1 per cent.
China's economy expanded by 7.8 per cent in the last quarter. Other countries still do not have available data for the full year.
Unsurprisingly, the GDP announcement by the National Economic and Development Authority (Neda) and the National Statistical Coordination Board (NSCB) was trending on Twitter, earning kudos from industry groups, such as the Makati Business Club.
Private economists, however, were not as impressed, noting that the lingering question was whether such figures could be sustained and translated into better incomes for many Filipinos.
Expectedly, the Palace cheered the "exceptional" growth rate, trumpeting it as proof of the country's ability to move toward "equitable progress" on a policy of good governance.
"It is a resounding affirmation of the Aquino administration's fiscal strategy, backed as it is by our robust macroeconomic fundamentals and more importantly, the principles of good governance," Budget Secretary Florencio Abad said in a statement.
Presidential spokesperson Edwin Lacierda attributed the economic growth to private sector activity goaded by the administration's policy reforms.
While it was initially driven by government stimulus, the economic growth was now increasingly being driven by private sector activity, including investments, which grew by 8.7 per cent in 2012, Lacierda said in a briefing.
"This means growth is becoming more sustainable from a fiscal and macroeconomic perspective. Private sector activity has been enabled by the Aquino administration's dedication to positive reform. Without doubt, good governance means good economics," he said.
Not quite impressed
Benjamin E. Diokno of the University of the Philippines School of Economics, however, was not impressed.
Diokno said that under President Corazon Aquino, the economy grew by 6.8 per cent in 1988 after a weak growth in 1987, while under President Gloria Macapagal-Arroyo, the economy grew 6.7 per cent in 2004 after a weak growth in 2003, and again by 7.6 per cent in 2010, after a near recession in 2009.
"I agree it's a strong growth. Considering its long-term growth potential and growth higher than 6 per cent might be considered strong. Is it sustainable? That remains to be seen. We've seen this kind of growth before and they were not sustained. Is it inclusive? I'm afraid not," he said.
Diokno said the contribution of agriculture to GDP continued to shrink, posting the lowest growth among the three major sectors.
"Based on the October labour statistics, the recent growth may be characterised as labour-shredding growth. Close to 1 million jobs were lost," Diokno said. Most Filipinos still depend on agriculture and related sectors for a living.
NSCB Secretary General Jose Ramon G. Albert said industry and services led economic growth on the supply side (sources of goods and services).
On the demand side (where goods and services are used), growth was still largely driven by household consumption and external trade.
Industry grew 6.5 per cent, more than twice the 2.3-per cent growth in 2011.
The Neda said the expansion in public and private construction, and the electricity, gas and water sector led the growth.
In the first two quarters of last year, it was public construction that took up the slack in construction, but the private sector took over beginning the third quarter.
"This is what we mean by the private sector upping its stakes in the economy," said Balisacan, who is also the Neda director general.
"Equally remarkable was the growth in the electricity, gas and water sector, growing by 5.1 per cent, a far cry from its growth of 0.6 per cent in 2011. No doubt this was in support of the increased economic activity in 2012," he said.
The service sector also beat expectations with a 7.4-per cent growth from trade, transport and communications, real estate, renting and business activities and other services.
Trade grew by 7.5 per cent in 2012, more than twice the figure in 2011. Growth in transport and communications accelerated at 9.1 per cent compared with 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 per cent," Balisacan said.
There were also notable gains in other services, particularly, tourism-related subsectors, such as hotels and restaurants, and recreational, cultural and sporting activities. These subsectors grew 13.3 per cent, compared with only 7.1 per cent in 2011.
Balisacan said he was also pleasantly surprised with the growth in agriculture (2.7 per cent).
"We only expected a 2.2-per cent growth from the sector owing to weather disturbances forecast for the year," he said.
In the first two quarters of 2012, it looked like the sector would underperform with a 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 per cent.
"We are also pleased to note that the output in the fishery sector had gone up by 3.3 per cent, from eight consecutive quarters of contraction if not stagnant growth," Balisacan said.
On the demand side, household consumption remained the largest contributor to growth in 2012, growing by 6.1 per cent. Although the growth was slower than the 6.3 per cent in 2011.
Balisacan noted that the growth had been on the increase coming from 5.1 per cent in the first quarter up to 6.9 per cent in the fourth.
Growth was supported by the higher level of economic activity, low and stable inflation, inflows of overseas Filipinos' remittances and government subsidy mainly through the conditional cash transfers.
"Note, however, that remittances of overseas Filipinos increased by 8 per cent in dollar terms, but only by 2.8 per cent in peso terms in October and November 2012," Balisacan said.
Exports of goods recovered with a growth of 8.7 per cent for the year from a contraction of 4.2 per cent in 2011. Exports of services grew by 9.8 per cent, more than twice the growth the previous year.
"However, this growth was actually slower than expected. Perhaps the sector is already feeling the pinch from the combined impact of the global economic slowdown and the appreciating peso," Balisacan said.
Fixed capital formation also improved to 8.7 per cent in 2012 as growth in investments for public and private construction and durable equipment registered significant increases.
In spite of the country's achievements in 2012, Balisacan said the government would not be "lulled" into complacency.
"It is our immediate task to put in place policies and implement programmes that will sustain our economy's growth over the medium term. We shall continue planting the seeds of a structural transformation in our economy to make it more investment and industry-led. This, in turn, will mean more jobs and employment opportunities of high quality for Filipinos, thus ensuring that growth is inclusive and benefits all sectors of society," he said.
Cid L. Terosa of the University of Asia and the Pacific said the growth level of at least 6 per cent could be maintained as long as the Philippines kept building up productivity.
So far, Terosa said, the fourth quarter and full year 2012 growth rates were impressive but the question remained whether those numbers could translate into better income for many.
"Employment and continuous structural changes are keys to economic growth over the medium-term," he said.