By Socioeconomic Planning Secretary Arsenio M. Balisacan
Press Conference on the Q1 2013 Performance of the Philippine Economy
National Statistical Coordination Board, Makati City
30 May 2013
Good morning. 

It is with great pleasure to report to you today that the Philippine economy, as measured by the gross domestic product (GDP) expanded by 7.8 percent in the first quarter of 2013. I should just say that the numbers speak for themselves, but allow me to go into specifics. 

First of all, this growth rate of 7.8 percent exceeded market forecasts, including my own. But please note that I was the most optimistic of all. Secondly, this is also the highest among the major East and Southeast Asian economies, particularly Indonesia (6.0%), Thailand (5.3%), Vietnam (4.9%), and the People’s Republic of China (7.7%). This achievement occurred at a time when OECD just downgraded its growth forecast for the year for most advanced economies and China. 

This growth figure is significant since it puts to rest the doubts cast on the 2012 figure as being due to base effects only. It also indicates to us that we may now be moving along a new growth trajectory. And by the way, GDP in 2012 actually grew by 6.8 percent! 

Business confidence and consumer optimism fuelled this growth, and this is not without basis. We have been aggressively addressing the infrastructure bottleneck. And this is evident in the 45.6 percent increase in public construction. The private sector is heavily investing in capacity as well. Adjusting for its magnitude, the contribution to growth of private construction is at least three times that of public construction. In fact, including other private sector investments such as on durable equipment, expenditure in capital formation, for the first time, contributed more to GDP growth than household consumption expenditure. 

We are committed to maintaining macroeconomic stability. Inflation continues to be low and stable, and the fiscal deficit at sustainable levels, including external performance indicators. And we have passed the scrutiny of two of the major credit rating agencies, Fitch and Standard & Poor’s, which awarded us an investment grade rating. This will further reduce the cost of capital and we hope that the business sector will take this opportunity to expand their investment interests and generate more employment. 

Government consumption grew by 13.2 percent due primarily to its support for social programs such as the Pantawid Pamilyang Pilipino Program (4Ps) and safe and potable water supply for water-less barangays nationwide. 

Net exports contracted primarily due to a decrease in external demand for electronic components. This situation is expected to hold until the rest of the year. For this reason, it is imperative that we diversify into other products and markets. In the immediate term, however, expansion in output can still be absorbed by the domestic market, supported by a better employment situation, strong inflows of remittances from Overseas Filipinos, and the low and stable inflation. 

On the production side, we are happy to note that growth was broad based as all major sectors contributed positively to growth during the period. Services expanded by 7.0 percent; industry, by 10.9 percent, agriculture sector by 3.3 percent. 

The manufacturing sector contributed the most to the growth in industry. I am proud to say, that despite the contraction of 8.4 percent in our goods exports, local manufacturing has grown at an impressive rate of 9.7 percent, primarily from what can only be deduced as a heightened domestic demand. The main contributors to the strong growth of manufacturing were manufactures of food, household appliances, communication equipment, chemical and chemical products, transport equipment, and machinery and other equipment. 

The next highest contributor to growth in industry is construction. The 32.5 percent strong growth of construction also indicates a good positioning towards an industry-led economy. The sector has been increasing rapidly with double digit growth rates since the second quarter of 2012. Initially, this was led by infrastructure spending of the government. By the second half of 2012, private construction started to rebound. 

Financial intermediation recorded the highest contribution to growth among the subsectors in services. Output expanded by 13.9 percent as outstanding loans increased, even as non-performing loans declined. 

Retail trade remained strong as the spending capacity of Filipinos continued to grow due to the improving employment situation, a 5.6 percent growth in overseas Filipinos (OF) remittances, and the 3.2 percent inflation rate that fell within the full year inflation target of the government. 

Meanwhile, tourism and other related industries supported the growth in Other Services. Tourist arrivals grew by 10.8 percent in the first quarter of 2013, which resulted in a growth of 21.3 percent in Recreational, Cultural, and Sporting Activities. 

Real estate, renting, and business activities continued to benefit from the sustained demand in residential and office spaces, which has led to a spur in growth in condominiums and commercial buildings within the business districts. Also, offshoring and outsourcing (O&O) activities continued to expand. 

Lastly, the agriculture sector growth catches up with a 3.3 percent rate for the quarter. The fisheries subsector bounced back from a series of contractions, and came in strong with a 5.5 percent growth rate. This demonstrates that sustainable management in fishery is also an effective growth strategy for the sector. 

We are now halfway through our Philippine Development Plan 2011-2016. We have accomplished a lot, but so much has changed both within our domestic confines and in the rest of the world. For this reason, the President has instructed the updating of the PDP, including the strategic framework that will bridge the gap from where we are now, to where we intend to be. 

Per capita GDP grew by 6.1 percent in the first quarter of 2013, faster than the 4.7 percent growth a year ago. This means that from the first quarter of 2011 to the first quarter of 2013, per capita GDP has increased by 11 percent, in real terms. We know, however, that inclusive growth is not about averages, but about the lower part of the income distribution, namely, the poor. On the other hand, we also know that growth is still the necessary condition for inclusive growth. The solution, therefore, is to create the conditions for sustained growth in other sectors or areas with high growth potential and link the poor to these growth centers. The faster this can be done, the better it will be for the greater number of our people. 

In addition to addressing the critical constraints to private investments, we will also put emphasis on innovation, technology and research and development. We will facilitate the improvement in labor productivity by investing in human capital and providing the capacity for the labor force to engage in higher value activities. What all these demands is a greater sense of urgency among us in government as well as better coordination between and among the various agencies charged with implementing programs and projects. Under the leadership of our President, we are coordinating our programs and projects to maximize efficiency and effectiveness. 

Going forward, we intend to focus the economy on priority sectors that are potential growth drivers and job-generators such as infrastructure, manufacturing, agriculture, tourism, logistics, BPO/IT, ship building, housing, and the halal food industry. 

We remain vigilant of downside risks. Disasters can negate the gains and even push back development. Moreover, the global economy remains fragile, negatively affecting our trade performance. Due to the attractive investment opportunities, we are also at risk of receiving too much capital inflows as advanced economies implement quantitative easing. The challenge is to channel these inflows into productive investments. 

We remain positive in our outlook and we will translate this into positive action to achieve inclusive growth. We hope that the private sector will maintain a positive outlook as well, and translate this into greater participation in the growth process. 

Salamat at Mabuhay Tayong Lahat.