Secretary Arsenio M. Balisacan
Economic Planning Secretary and
Press Conference on the Q4 and Annual Performance of the PH Economy
Philippine Statistics Authority, Makati City
29 January 2015
Ladies and gentlemen, members of the media, our colleagues in government, good morning. I am pleased to inform you that the Philippine economy grew by 6.9 percent in the last quarter of 2014, pushing the average full-year growth to 6.1 percent, and maintaining the country’s trajectory towards a path of high growth. The fourth quarter and full-year growth is above the market expectation of 6.0 percent and 5.8 percent, respectively.
Compared to other Asian economies that have already released their fourth quarter growth data for 2014, the Philippines was the third fastest, next to the People’s Republic of China with 7.3 percent and Vietnam with 7.0 percent. But on a full-year basis, our country ranked second next to China with 7.4 percent and slightly higher than Vietnam with 6.0 percent. With this upbeat year-end performance, the economy is anticipated to gain further traction in 2015.
Growth in the fourth quarter of 2014 appears to be broad-based as all three major productive sectors – the agriculture, industry, and services sectors – have shown positive and robust growth during the period. Most notable is the recovery of the agriculture sector, which significantly grew by 4.8 percent in the fourth quarter of 2014 from the 0.9 percent growth in the same period in 2013. The industry sector grew by 9.2 percent in the fourth quarter, its highest in the last six consecutive quarters since the third quarter of 2013. The services sector also grew by 6.0 percent in the fourth quarter, the same growth for the 2014 full-year average. These numbers show the sustaining and reinforcing dynamism from the private sector that is contributing to the growth of the Philippine economy amid various challenges it faces. Thus, maintaining and increasing this level of business confidence is always an utmost priority of the Philippine government.
Agricultural production accelerated mainly due to the rebound in crops and fisheries output. Crop production, which accounts for about 50 percent of total agricultural output grew by 5.7 percent, coming mostly from palay and corn. Most areas that reported higher palay and/or corn output benefitted from moving the harvests from the third quarter to fourth quarter for a more favorable weather condition. The higher output could also be attributed to the increased usage of high-yielding seed varieties.
Meanwhile, owing to its sheer size, the services sector remains the largest contributor to growth, followed closely by the industry sector. Growth in services improved relative to the 2014 third quarter growth with a recovery in public administration, transport and communications, and stronger growth in real estate, renting, and business activities, which include BPOs. Meanwhile, the acceleration in industry growth was due to the double-digit expansion in construction, even as manufacturing remained as its biggest growth driver. Compared to previous quarter’s 7.6 percent growth, the pickup in construction pushed the industry sector’s growth rate higher as both public and private sectors sped up implementation of projects, with public construction reversing its negative growth. For private construction, major developers remained bullish due to continued strong demand for office, retail, and residential space.
On the demand side, the robust private consumption during the quarter was mainly on account of higher purchases for food and non- alcoholic beverages, housing, water, electricity, gas and other fuels, miscellaneous good and services, transport, and private construction. It was also buoyed by the rising number of employed Filipinos, which grew by 2.8 percent to 38.8 million from 37.8 million a year ago, based on the October 2014 round of the Labor Force Survey or LFS. This was accompanied by the decline in the unemployment rate from 6.4 percent to 6.0 percent in the same LFS round.
Meanwhile, exports grew by 15.5 percent in real terms in the fourth quarter and a full-year expansion of 12.1 percent relative to the previous quarter’s growth of 9.9 percent. Exports of goods increased by 15.9 percent from 6.2 percent in the fourth quarter of 2013 as positive developments in the global manufacturing sector were seen. The faster growth in exports of services to 14.1 percent from a 6.7-percent decline came mainly from the business process outsourcing or BPO sector. Currently, the industry employs 1.052 million Filipinos and by 2016, the sector targets to achieve 1.3 million full time employees and US$ 25 billion in revenues.
Moreover, the government stood by its commitment to ramp-up and catch-up with its spending as we approached the last three months of 2014. This is evident in the 9.8-percent increase of Government Final Consumption Expenditure in this period—a far cry from the 2.6-percent contraction in the third quarter of 2014 and from a 0.4-percent contraction in the last quarter of 2013. Double-digit growths in Personal Services and Maintenance and Other Operating Expenses were recorded in this period.
The numbers tell us that we are moving in the right direction. There may have been some glitches along the way as we adjusted to the new systems that the government had put in place in pursuit of good governance. But clearly the economic policies and strategies we are implementing to achieve sustained and inclusive growth are bearing fruit.
Despite this notable performance of the economy, we remain vigilant against risks from the global front. Current global economic conditions still exhibit mixed signals influenced by critical developments: sluggish world trade, muted commodity prices, and rising interest rates and risk spreads in many emerging market economies, in contrast to the persistently low interest rates in major advanced economies. Specifically, the sharp deceleration of petroleum prices beginning the second half of 2014 is benefitting oil-importing economies but is tempering the growth prospects of oil-exporting countries. The net effect to global growth, however, is positive.
Amid the lingering and uneven external conditions, the economy is likely to draw its vigor from the domestic front. On the supply side, the agriculture and fishery sector is seen to continually grow due to rice and corn yield improvements, resurgence of fishery, and the moderate expansion of livestock and poultry. Furthermore, manufacturing will rely on buoyant exports, robust domestic demand for manufactured goods by rising household incomes, fueled partly by overseas Filipino remittances, and the rise of election-related spending. Also, the surge of private construction is expected in residential projects and office space. Services will be bolstered by soft oil prices, vigorous domestic trade, strong financial intermediation, vibrant BPO industry, and significant international meetings that will transpire this year. On the demand side, household consumption will likely remain buoyant, supported by better employment opportunities and remittances. Investment will largely be fueled by the capital expenditures of big firms in the country, and, expectedly, the catching up of the government on its infrastructure program, including reconstruction in disaster-hit areas, will further drive the sector’s growth. Also, exports will continue to grow despite the fragility of the global economy.
Overall, the Philippine economy’s performance in 2014 and the preceding years starting in 2010 shows how our country can no longer be called the “sick man” of Asia. Our economic growth is becoming more competitive with our East and Southeast Asian neighbors. We have avoided the dreaded boom-and-bust cycle that has hounded our economy for decades.
We have worked hard not only to get the economy going but also to institute critical governance reforms. Our experiences through the years of the Aquino administration taught us that, indeed, good governance combined with good economics can lead to good growth—growth that is rapid, sustained, and inclusive, which we have always been aspiring for. The task is far from complete though.
Therefore, we should not put to waste what we all have achieved through the years. We need to protect the gains we have so far achieved — in managing the economy, in restoring the people’s faith in the bureaucracy, in bringing about peace — which account largely for the business confidence that the country has earned. We therefore remain committed to the governance and economic reforms we have laid out to keep the fruits of our labor intact, avoid a significant reversal of gains, and continue to move towards inclusive growth.
Salamat at mabuhay tayong lahat.