STATEMENT Sec. Arsenio M. Balisacan Press Conference on the Performance of the Philippine Economy for Fourth Quarter of 2012 and Annual 2012 10:00 AM, 31 January 2013 NSCB Operations Room
Good morning.
I am very pleased to report to you that our economy grew by 6.8 percent in the last quarter of 2012, which places the full year growth at 6.6 percent. At the close of 2011, we in the Development Budget Coordination Committee or DBCC set the target growth of GDP at 5-6 percent and then proceeded to design a fiscal program that would support this growth. On hindsight, it now appears that the 5-6 percent target was a bit low although at the time, this seemed like a fighting target. After all, we were coming from a 3.9 percent growth in 2011; budgetary reforms had just been put in place and others were still to be implemented. There was also the worsening crisis in the Euro Area; the forecast of mild El Nino, and many other such uncertainties. And now that we have surpassed the target, more than anything, we should really thank the private sector and the general public for trusting us to the point that they were willing to increase their stakes in our economy.
On the supply side, all sectors performed beyond expectations led by industry, then services and even agriculture.
Industry grew by an impressive 6.5 percent, more than twice the growth exhibited in 2011 at 2.3 percent. As you can see, this was led by the expansion in public and private construction activities and the electricity, gas and water sector. In the first two quarters of 2012, it was public construction that took up the slack in construction but the private sector has taken over beginning the third quarter. And this is what we mean by the private sector upping its stakes in the economy. Equally remarkable was the growth in the electricity, gas and water sector, growing by 5.1 percent, a far cry from its growth of 0.6 percent in 2011. No doubt this was in support of the increased economic activity in 2012.
The service sector also defied expectations growing at 7.4 percent mainly contributed by trade, transport and communication and real estate, renting and business activities, and other services.
Trade grew by 7.5 percent in 2012, more than twice the growth in 2011. Similarly, growth in transport and communication accelerated more than twice, at 9.1 percent compared to 4.3 the previous year. Meanwhile, 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 percent. 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 by 13.3 percent, compared to only 7.1 percent in 2011.
Even the agriculture sector defied expectations, growing by 2.7 percent. We only expected a 2.2 percent growth from the sector owing to weather disturbances forecast for the year. In the first two quarters of 2012, it even looked like the sector would under-perform, weighed down by the 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 percent. We are also pleased to note that output in the fishery sector had gone up by 3.3 percent, from eight consecutive quarters of contraction if not stagnant growth.
On the demand side, household consumption remained as the largest contributor to growth in 2012, growing by 6.1 percent. Although the growth was slower than the 6.3 percent growth in 2011, we should note that the growth has been on the increase coming from 5.1 percent in the first quarter up to 6.9 percent in the fourth. This growth has been supported by the higher level of economic activity, low and stable inflation, inflows of overseas Filipinos’ remittances and government transfers mainly through the conditional cash transfers or the CCT. Note, however, that remittances of overseas Filipinos increased by 8.0 percent in dollar terms, but only by 2.8 percent in peso terms in October and November 2012.
Exports of goods recovered with a growth of 8.7 percent for the year from a contraction of 4.2 percent in 2011. Exports of services grew by a remarkable 9.8 percent, 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.
Fixed capital formation also improved to 8.7 percent 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, the government will definitely not be lulled to complacency. It is our immediate task to put in place policies and implement programs 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.
In support of attracting more investments and pursuing industrialization, the government is serious in addressing the country’s energy requirements, especially in the Visayas and Mindanao. The objectives of the energy sector are to raise energy capacity, achieve a reliable and adequate supply of electric power, and expand rural electrification in the country. Lest the current growth momentum stall once again, we should ensure that power supply is sufficient to support the anticipated expansion in investment. It is vital to harmonize policies and guidelines among concerned agencies on the exploration, development, utilization and conservation of natural resources for energy projects.
Through governance reforms, we have tightened our mechanisms towards strengthening the link between policy making and investment programming. As the national blueprint for inclusive growth, the Philippine Development Plan for 2011-2016 has guided national government agencies in crafting and implementing their respective sectoral initiatives. Our thrust now is to ensure that local and regional plans are in sync with the government’s strategies in achieving continued economic growth and a significant reduction of poverty. Related to this is the strategic response of the government, both local and national, during times of disaster. We have noted that efforts have thus far centered on short-term relief operations, but more attention should be given to the longer-term rehabilitation measures. This calls for more efficient and strategic approaches in addressing not only risks to disasters but also environmental and economic threats from climate change.
In the previous quarter, we already flagged the impact of a stronger peso. We continue to note that this will affect the competitiveness of our BPO and exports sectors, the profitability of local production over imports, as well as the purchasing power of the earnings of overseas Filipinos. Rest assured that your economic managers are talking with each other about how best to address this issue.
Despite the more positive global outlook in 2013, we continue to remain vigilant of the global and domestic risks to growth. According to the US Federal Reserve Board, US economic and employment performance has continued to grow at a reasonable pace in recent months, while the International Monetary Fund says that global economic conditions have improved slightly and prospects for 2013 will likely be healthier despite the slow pace of recovery. However, the Euro area still remains a major concern. There is also the possibility of oil price increases due to a higher global demand for petroleum products, coming from advanced and emerging economies, and the instability in the Middle East.
On the domestic front, the agriculture sector is seen to be more vibrant in 2013, even if it is highly vulnerable to weather disturbances. Latest situationer from PAGASA shows a more favorable weather condition that awaits the sector, as El Niño is likely to slow down and ENSO-neutral conditions, described as the absence of either El Niño or La Niña, will prevail over the next several months. However, part of the costs of the widespread flooding and landslide and extensive damage to agriculture brought by Pablo in the last quarter of 2012 will continue to be felt in the first quarter of 2013.
Compared with the latest available data from our neighboring ASEAN countries, our fourth-quarter 2012 GDP growth of 6.8 percent is higher than that of Vietnam (5.4%) and Singapore (1.1%). The People’s Republic of China expanded by 7.8 percent in Q4 2012, while other countries still do not have available data.
Given the vibrant economic performance, we believe our growth assumptions for 2013-2016 are realistic. The DBCC might convene a meeting in the coming weeks to review our progress, especially in the fiscal front. The crucial issue is the implementation of appropriate policies and measures to ensure that we will sustain this high growth and make it inclusive in the medium term. We should also strategically overcome the challenges ahead of us and take advantage of all the opportunities that will allow our country to get onto a higher trajectory of growth. And improve the lives of our people. The sooner, the better.
Thank you and Mabuhay Tayong Lahat!
M.R. No. 2013-013
31 January 2013
