Behind the Philippines’ 7.8 percent growth


Surpassing expert projections, the Philippines saw a 7.8 percent surge in its Gross Domestic Product (GDP) for the First Quarter (Q1) of 2013, exceeding projected figures of a 5 to 6 percent GDP growth this year, reports the National Economic and Development Authority (NEDA).

GDP is one of the prime indicators of a country’s economic health and economic size, representing the total value of goods and services produced within a certain period of time.

The 7.8 percent growth rate broke the 6 percent predictions of reputable firms such as the Asian Development Bank (ADB), International Monetary Fund (IMF), and Standard & Poor, among others.

According to NEDA Secretary Arsenio Balisacan, the Philippines’ GDP ranking was the highest among the ASEAN countries for Q1 2013, beating economic giant China’s 7.7 percent Q1 GDP growth this year.

The news follows the strong momentum for the Philippine economy – a 6.8 annual GDP in 2012 coupled with an accelerating growth rate – which earned the country praise for evolving from the “sick man of Asia” to a “rising tiger” economy.

The Philippines is expected to maintain a trend GDP growth of 6 to 6.8 percent throughout the year, according to IMF’s economic outlook database.

Internal factors

As much as the surprising Q1 GDP growth impresses the forecast of economists, the factors that have driven the development yield to be even more unexpected.

According to, the GDP growth in 2012 was pushed to up to 6.5 percent by the Public Administration and Defense: Compulsory Social Security (PAD), Mining & Quarrying, Construction and Services. While remittances from OFWs continue to be a constant growth driver, the construction and infrastructure sectors contribute further to the growth, along with the manufacturing sector.

The service sector was also crucial, where financial intermediation supplemented its expansion. Meanwhile, 3.6 percentage points of the GDP can be attributed to household consumption alone.


External factors

With the revival of the industry sector, foreign investors shifted focus to the Philippines, especially with the Aquino administration’s anti-corruption thrusts. Meanwhile, China juggles higher wages, Vietnam battles economic concerns, and Thailand and Indonesia settle issues of governance.

Others argue that the growth was chanced upon by the recently concluded senatorial elections. Election spending reached up to P584 billion, according to a report by the Philippine Star. Former National Treasurer Leonor Briones believes that the election period was a chance for the infrastructure and construction sectors to expand, as they naturally do at that time.

In its May 2013 Philippine Economic Update, the World Bank noted private consumption and government spending to be another contributor to the Q1 GDP growth of the nation.


Philippines’ investment grade

The first-ever “investment grade” rating and fresh one-notch upgrades from debt watcher firms Fitch Ratings and Standard & Poor’s has made the country a new venue for foreign investors in the Philippines, in light of shifts in the global economy.

The Philippines new credit rating highlighted the country’s medium-class companies and capacity to meet its financial commitments. Yet, the country remains highly susceptible to shifting global economic conditions that may weaken its capacity to meet future financial demands.

Department of Trade and Industry (DTI) Trade Undersecretary Cristino L. Panlilio said in a statement that the Board of Investments (BOI) recorded 487 inbound business visits from January to October last year, three times larger that of 2011.

In addition, the NSCB stated that total approved foreign investments grew the fastest last year, rising twelve percent from the 258.2 billion seen in 2011.

The Department of Finance promised, “We will preserve all the factors that made this investment-grade rating possible—low and stable inflation, favorable interest rates and a sound banking system, a sustainable fiscal position, and a strong external position.”


Inadequate jobs, impoverished families

Despite the influx of service, manufacturing and construction jobs from foreign companies, the country’s unemployment rate remained at 7 percent, while underemployment – employed Filipinos seeking additional income – stayed at 20 percent, shows latest data from the National Statistics Office.

ADB Country Economist Norio Usui stresses the need to provide more for the 40 million-strong Filipino labor force.

A recent SWS Social Weather Survey ranked adult unemployment at 25.4 percent, or 11.1 million Filipino adults. The same report furthered that adult joblessness has stayed at 20 percent for “almost 8 years”.

According to Usui, the labor force continues to grow 2 percent (around 1 million) per year, requiring 800,000 new jobs to be created annually just to sustain the current employment rate.

Usui furthers that the continued deployment of Overseas Filipino Workers (OFWs) “masks” the country’s unemployment and underemployment problems.


Who benefits?

Midterm last year, Philippine Economist Cielito Habito calculated that the increased wealth of Forbes’ 40 richest Filipino families accounted for 76.5 percent of the GDP increase early last year, or a collective wealth increase of $13 billion.

In an April press release by the National Statistical Coordination Board (NSCB) poverty incidence remained virtually unchanged from roughly 28 percent since 2006. Furthermore, the 2013 First Quarter release of the SWS Social Weather survey revealed a rise in self-reported involuntary hunger across an estimated 3.3 million Filipino families, or 16 percent.

According to a May 15 report by the Business Mirror, Economist Bernardo Villegas in the 2013 CEO Awards launch called for infrastructural development and revisions to the 1987 Philippine Constitution of the Philippines – particularly provisions that limit foreign investors.

Villegas warned, “[Restrictive foreign ownership of businesses] does not benefit Filipinos. It benefits rich Filipinos because they are the ones who have a monopoly of all these things that foreigners cannot get into.”


Sustaining potential

Through a year-ender report by, senior advisor at the American Chamber of Commerce in the Philippines John Forbes observes, “Massive improvements in physical and social infrastructure are urgently needed and will still take years.”

World Bank’s May 2013 Philippine Economic Update urged the Philippines to refocus on sustained inclusive growth (particularly health, infrastructure and education) and a comprehensive reform agenda.

World Bank highlighted the simplification of business regulations to encourage growth of more firms, encouraging economic competition and securing land property rights for rural and urban residents/businesses.

NEDA chief Balisacan stresses the importance of infrastructural development to support the country’s burgeoning GDP performance, and to link economic growth to the poor. He hopes to see further participation of private sectors in the development process.

Forbes in the same report concludes, “This process is only starting in 2012. Making the cost of doing business in the Philippines more competitive in the region will improve the efficiency of the economy, but efforts in this regard move quite slowly.”

In its regular press briefing, Presidential Spokesperson Abigail Valte says that President Aquino’s administration has been focusing on fostering inclusive growth since the start of his term in 2010.

Michelle Sta Romana

By Michelle Sta Romana

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