STATEMENT OF SECRETARY ARSENIO M. BALISACAN Press Conference on the Performance of the Philippine Economy for Third Quarter of 2012 28 November 2012, 10:00 am Operations Room, National Statistical Coordination Board
Good morning.
It is my honor to report to you that we are well on our way to surpassing our growth target of 5-6% this year. Our country’s gross domestic product (GDP) grew by 7.1 percent in the third quarter which brings the Philippines’ year-to-date economic performance at 6.5 percent. Once again, the third-quarter performance was way above the market’s median forecast of 5.4 percent. Moreover, we posted the fastest economic growth within ASEAN.
The economic expansion continues to be broad-based, as almost all sectors posted higher year-on-year growth rates.
Household spending contributed more than half of the growth on the demand side. This was supported by slower movement of prices, as headline inflation averaged 3.5 percent from July to September 2012, and the continuous improvement in consumers’ confidence, as reflected in the Bangko Sentral ng Pilipinas’ Consumer Expectations Survey in July, where respondents cited greater availability of jobs and more employment as one of the factors for their positive outlook. The steady inflow of remittances from overseas Filipinos, which grew by 4.2 percent in peso terms, also contributed to the higher household spending.
The exports sector continued its rebound this year, increasing by 6.7 percent in the third quarter from a negative 14.8 percent in the same period last year. Although the sector’s growth was still subdued, the surge in the overseas sales of metal components (466%), telecommunications (473.8%), and office equipment (106%) may be a sign of renewed vitality of the regional production networks, of which we are a part. The high growth of export of goods was coupled with the increase in export of services, which grew by 7.6 percent in the third quarter from 5.3 percent in the same period last year. Growth in the business process outsourcing (BPO) sector was also observed as miscellaneous services grew by 10.2 percent, up from 6.6 percent last year.
While contractions were experienced in the export receipts of semiconductors and electronic data processing equipment, both items significantly contributed to imports performance, which likewise rebounded to 8.3 percent in the third quarter from a negative 1.8 percent in the same period last year. This may mean that manufacturers have been stocking up on intermediate inputs in anticipation of a recovery in the global demand for electronic products.
Spending for construction of physical capital increased by 24.3-percent in the third quarter of 2012, a huge turnaround from a negative 8.8-percent performance in the third quarter of 2011. Both private and public construction registered more than 20-percent growth rates during the said period. We have previously noted that a major driver of this growth is the demand for office space due to the strong outlook of the BPO sector. Also, favorable economic conditions led more individuals to purchase residential properties. On the other hand, public spending on construction grew, backed by the higher capital outlay of government, 38.4 percent more, for roads and irrigation projects. Most of these projects were implemented outside NCR, in keeping with our objective of inclusive growth.
Government final consumption expenditure expanded by 12 percent, as personnel services grew by 11.9 percent due to the implementation of the last tranche of the Salary Standardization Law. Government also addressed procurement and administrative issues to be able to increase the spending on MOOE. A number of important programs have been implemented as well. Among them are the Department of Agriculture’s rice and corn program in support of food security and the Department of Social Welfare and Development’s Conditional Cash Transfer (CCT) program, which now benefits more than three million poor families. Around PhP15.3 billion were disbursed for the CCT program, increasing the number of beneficiaries by about 800,000 families this year.
On the supply side, services continued to account for the lion’s share of the GDP at 58 percent. This was led by trade, which grew by 7 percent in the third quarter of 2012. Real estate also posted strong expansion, as major players including Ayala Land, SM Prime Holdings and Megaworld posted double-digit revenues in terms of real estate and rent of commercial spaces. Significant positive performances were also noted in transportation and communication storage due to the decline in domestic petroleum prices, which helped increase land transportation by 5.5 percent, and the robust revenue growth in communication, which helped propel growth in that sector to 9.6-percent growth. With a vibrant tourism sector that catered to around 3.1 million tourists as of September 2012, revenues of other services that include restaurant and hotels increased by 5.3 percent in the third quarter.
In the industry sector, the 5.7-percent expansion posted by the manufacturing sector in the third quarter of 2012 was a marked improvement from the 2.0-percent increase in the same quarter last year. Double-digit growths were seen in wearing apparel (56.7%), furniture and fixtures (35.1%), office accounting and computing machinery (20.4%), rubber and plastic products (11.9%). Still, we hope that the industry sector would expand much faster. In particular, we hope to see a faster growing manufacturing sector. While we are encouraged by the increase in construction activity in the third quarter knowing that the sector is labor-intensive, we also know that construction jobs are temporary and intermittent. And we are counting on a growing manufacturing sector to provide the higher quality jobs that are also more stable and remunerative. To help boost the sector, the Department of Trade and Industry, together with industry players and Philippine Institute for Development Studies have been preparing industry road maps. These road maps will identify constraints to growth as well as possible solutions.
Agriculture performed better during the third quarter than in the four previous quarters. Worth mentioning is the big increase in palay and corn outputs, which can be attributed to the Government’s push for food security. The fishery sector, however, remains a problem, as it continues to contract. Needless to say, this is already being addressed and we hope to see a recovery of the sector soon.
Overall, the Philippines’ third-quarter GDP growth was the highest in ASEAN. Indonesia came in second with 6.2 percent, followed by Malaysia (5.2%), Viet Nam (4.7%), Thailand (3.0%) and Singapore (0.3%). On the other hand, China registered a 7.7-percent GDP growth in the said period.
We will face the fourth quarter not only with utmost optimism but also with careful vigilance, especially noting the challenges ahead. The problems in the Euro area remain unresolved. There is also the looming fiscal cliff in the US. The slow recovery in the US economy continues to affect us negatively as their monetary authorities try to prop up their economy through quantitative easing. This, combined with our strong macroeconomic fundamentals and good economic prospects, has resulted in the appreciation of our currency threatening to erode our competitiveness. Rest assured that we are monitoring this development very closely. Our Bangko Sentral stands ready to counter drastic volatility in the exchange rate; and they are well-equipped to do so. The Department of Finance has also been looking to re-balance the composition of our borrowings in favor of domestic sources. Moreover, as we gain traction to implement major infrastructure projects, including PPP projects, next year, the pressure on the pero to appreciate should ease even more as much greater demand for dollars will match the inflow of remittances and export earnings.
As you can see, our efforts at good governance are beginning to bear fruit. But we know that our task is far from over. We continue to reform our systems in procurement and budgeting to promote transparency and accountability. At the same time, we are serious about addressing the huge backlogs in infrastructure, particularly transport, and the inefficiencies in the bureaucracy, particularly those that keep the cost of doing business unduly high. Most importantly, we have to give credit to our leadership who did not waiver in the belief that “kung walang corrupt, walang mahirap.”
Thank you and good morning.
November 28, 2012
