High trust by the business sector on the new Aquino government is now paying off handsomely. After correcting last year’s real GDP growth from 6.6 percent to 6.8 percent overall, the government reported yesterday that the economy registered an almost unbelievable 7.8 percent growth (in real terms or after discounting for inflation) in the first quarter. This is higher than the 6.5 percent growth registered in the same period last year and the 6-7 percent GDP growth target of the government for the year. This is also the third consecutive quarter now in which GDP growth runs at more than 7.0 percent. This 7.8 percent growth in the first quarter could also be the highest among the ASEAN member countries if not for the entire South East Asia except perhaps China.
By source of output, the first quarter growth was led by the industry sector which grew by 10.9 percent. Not far behind was the services sector which grew by 7.0 percent but the combined agriculture, hunting, forestry and fishing sector grew only by 3.3 percent. Industry’s 10.9 percent growth in the first quarter was twice faster than the 5.3 percent expansion achieved by the sector in the same period last year. The industry sector’s growth alone accounts for 3.5 percentage points overall to the GDP growth in the first quarter.
Within the industry sector, construction led the expansion with 32.9 percent growth in the first quarter. Manufacturing grow by 9.7 percent but the utilities group, consisting of electricity, gas and water supply barely grew by 0.1 percent. Hamstrung by contentious policy debate, mining and quarrying went down by 17.0 percent.
By type of expenditures, GDP growth was led by capital formation or investment which jumped by almost half or 47.7 percent in the first quarter. The big leap was made possible by the 16.8 percent increase in fixed capital formation and much smaller drawdown in inventories in the first quarter compared with the same period last year. In fixed capital formation, construction went up by 33.7 percent. This came from the 30.7 percent increase in investment in private construction and 45.6 percent increase in investment in public construction. Investment in construction went down by 1.2 percent in the same period last year.
Growth in household final consumption expenditures was slower at 5.1 percent in the first quarter compared to its 6.6 percent overall growth last year but this time government final consumption expenditures took up the slack by growing at 13.2 percent. Overall, government expenditures grew by 12.2 percent last year.
In the first quarter, the most disappointing result came from export which declined by 7 percent with exports in goods falling much faster at 8.2 percent. Export in services fell only by 2.1 percent. But while export went down, import still went up by 1.6 percent, mostly from import of services which grew by 11.1 percent. Import of goods declined by 0.9 percent.
For the whole of last year, export grew by 8.9 percent while import also grow by 5.3 percent. The decline in export was expected in view of the continuing weakness of the global economy. The global economy, however, is now slowly regaining strength due to the continuing albeit slow rebound in the United States resulting from the Federal Reserves’ non-stop easing of money supply and the latest drastic policy change in Japan to inflate the economy by monetary expansion. Some problems though still remain, especially in Europe, where unemployment is still very high due to their reluctance to stiumlate the economy.
But as we have already seen last year and in the first quarter of the year, the Philippines need not be greatly hampered by the weakness of the global economy as long domestic demand expands by way of more private and public consumption expenditures and investments, particularly in construction.
In construction, there is still so much to be done to raise the country’s infrastructure to global standard. Fortunately, in addition to good governance, this is also what the present government is pushing. In Cebu, for example, we are now witnessing the massive works started in widening the Naga-Carcar Road and the Mactan Circumferential Road. Soon we will also see the construction of the new terminal at the Mactan Cebu International Airport, including the construction of a new airport in Panglao Island in nearby Bohol.
Let it not be said though that with the rapid rise in the economy now we will see immediately the disappearance of poverty in the country. This will not come because presently the greater part of the product of our growth goes only to the few rich Filipinos who cornered most of the fast growing industries or high positions in government.
I am worried, for example, that while many of our people still depend on land and nature for livelihood, growth in agriculture barely catches up with our population growth. This is the reason why many of our people in the rural areas are still poor and why on account of their poverty they are forced to migrate to cities. Yet, in cities, they still get very little for lack of proper education or training required when working there. From rural poor, they are now part of the great army of urban poor who congregate in the slum areas of our cities.
More than the rapid and sustained growth in the economy, we also need to make development more participatory and equitable if we are to wipe out much of our poverty. This means that more jobs should come with economic growth, not jobless growth like what we had seen in the ten years of the previous government and now in the first half of the new Aquino government where the combined unemployment and underemployment rates easily run up to a quarter of our labor force. Only when jobs are plentiful, will wages rise and lift many people out of poverty but where are jobs?