STATEMENT OF THE SOCIOECONOMIC PLANNING SECRETARY ARSENIO M. BALISACAN ON THE RELEASE OF THE SECOND QUARTER 2012 NATIONAL INCOME ACCOUNTS

Good morning, everyone.

I am pleased to amplify the NSCB’s report.The Philippine economy, once again, registered another quarter of strong growth, as the Gross Domestic Product was up by 5.9 percent in the second quarter of 2012, well above the average market forecast of 5.3 percent. The brighter economic outlook supported by increased business confidence, strong employment creation, and accelerated government spending all contributed to the continued resurgence in economic activities from a moderate growth of 3.6 percent in the same period in 2011.

The strong growth is in large part due to the accelerated public investment, as well as a recovery in capital formation.  Government spending on public construction in the second quarter grew by 45.7% year on year, while capital formation grew 2.3% as compared to a decline of 10.5% in the same period last year. The capital formation figures strongly suggest that investments, which had been negative in previous quarters, has bottomed out, and that growth in capital formation is resuming.

The growth for the quarter was supported by accelerated government spending for infrastructure, including for conditional cash transfer (CCT) spending which supported consumption, low inflation which kept household consumption stable, better exports performance, continued credit expansion, buoyant tourism sector, sustained overseas Filipino remittances, increased business and consumer confidence, and an overall positive domestic outlook.

Within the ASEAN, the Philippine economic growth performance was above the preliminary average growth (4.7%) of the region, growing faster than Malaysia (5.4%), Thailand (4.2%), Vietnam (4.4%), Singapore (2.0%), but lower than Indonesia (6.4%). All of these, however, was overshadowed by China’s GDP growth (7.8%). 

               Given the preliminary first semester estimate of 6.1 percent and with the inflation kept close to the lower bound of the Bangko Sentral ng Pilipinas’ target of 3.0 – 5.0 percent, we maintain our view that the full-year 2012 real GDP growth rate projection of 5.0 – 6.0; perhaps the higher end of the target is well within reach. Based on the latest expectations survey, the business sector expects sustained economic expansion. We are optimistic that the resiliency of our economy, as reflected by the strong real GDP performance in the two quarters of 2012, will not dissipate in the succeeding quarters despite the uncertainties. Our optimism will be matched by measures to address our fiscal challenges, and we trust that our colleagues at the BSP will continue with their appropriate monetary policies. We will continue safeguarding the welfare of our overseas workers who faithfully play a very important role in our development. We should take advantage of the improved confidence of businesses and consumers to direct the country to a level of growth that is not only high but also inclusive—meaning growth that benefits all.

               The government however remains vigilant about risks to our growth. Further weakness of a struggling global economic recovery will remain a strong challenge in the near-term, with the slowdown of China reining in on global growth. The latest International Monetary Fund (IMF) projection shows that the global economy in 2012 is expected to decelerate by 0.4 percentage points or to grow only by 3.5 percent. However, by 2013, global growth is expected to post an upturn at 3.9 percent, similar to the 2011 world output growth. In the light of these prevailing global economic conditions, risks to the external trade of the country have increased, although these could be cushioned partly by the increased diversification of our exports.  Worth noting is the strong performance of agricultural exports and other intermediate goods exports.  The intensification of the Euro Area problem and the geopolitical uncertainty are also external risks which can cause spikes in the world price of oil.  Another downside risk is the El Niño phenomenon, which, according to experts, will commence on the third quarter of the current year until the first quarter of 2013. This type of El Niño, according to experts, will be weak to moderate.  This will impact on the agriculture sector, although this will be mitigated partly by our investments in irrigation.

Notwithstanding these challenges, the government stands ready to support growth. For one, our economy remains cushioned and resilient with sound macroeconomic fundamentals. In addition, government will continue to accelerate spending particularly on critical infrastructure projects. The Department of Budget and Management (DBM), for instance, released PhP5.5 billion to the National Housing Authority (NHA) for the implementation of the Resettlement Program, in line with the government’s drive for better living conditions for poor or at-risk Filipino families. To further improve competitiveness, DPWH was already given the resources amounting to PhP2.39 billion to bolster key projects under the public-private partnership (PPP) program. This includes allocation supporting road and flood control right-of-way claims across the country, in order to fast-track the implementation of road and flood control projects of the government within the near-term. As of date, the DPWH has successfully bid out 91 percent or 2,227 of the 2,452 infrastructure projects slated for full-year 2012, with 87 percent or 2,132 of these projects already given Notices to Proceed. The DBM also confirmed that an additional PhP5 billion is being validated for national roads leading to tourism zones for implementation in the second semester.

Aside from providing support to investment growth, household consumption is seen to remain buoyant on account of expected robust remittances in the next coming quarters and the surge of tourists arrivals, whose number already reached  2.1 million visitors for the first half of the year representing 11.68 percent growth relative to the same period a year ago.  The Department of Tourism expects tourist arrivals to reach 4.6 million tourists this year, with the implementation of the Philippine Development Plan and the National Tourism Development Plan (NTDP) and with the new tourism brand in place.

The second quarter performance validates the strong growth recorded in the first quarter. The firm domestic demand and an improving export sector is expected to stimulate the economy’s production sectors, particularly agriculture and industry, in the next two quarters. Nonetheless, appropriate policy actions were already mapped out in response to the recent weather conditions to mitigate its impact on the economy.   Given the support of all—private individuals, businesses and government, we remain committed to translate these economic statistics into enduring positive fruits of socio-economic well-being.

MR No. 2012-056

30 August 2012

Thank you very much.