Nagacadan rice terraces, Ifugao Province in the Philippines. The El Nino heatwave has pushed up the price of rice. Source: Wikimedia
The Philippine GDP rose 6.9 per cent year on year during the first quarter, on the back of impressive consumption and election-related spending.
It outperformed market expectations and was stronger than China’s 6.7 per cent and Vietnam’s 5.5 per cent.
State consumption surged 9.9 per cent in the first quarter year on year, while household expenditure climbed 7 per cent. The two categories contribute about 70 per cent to GDP, making the Philippines among the least dependent Asian nations on export demand for growth.
On a quarter-to-quarter basis, the Philippines’ economy expanded by 1.1 per cent in the first quarter of this year. Nominal GDP was around 13.45 trillion pesos (US$287 billion).
Manufacturers have stepped up operations in the archipelago in response to the rising population and low rural wages. The industrial sector grew 8.7 per cent on the year in the first quarter, while the construction rose by 12 per cent and investments 24 per cent.
Household spending, which makes up 70 per cent of GDP, rose 7 per cent on the year and expats send home more than a trillion pesos a year in remittances, boosting domestic consumption. The younger generations are also enjoying higher wages, partly due to the growth of call centres and other international business outsourcing.
Presidential-election spending also helped boost the GDP, with analysts suggesting it will also send second-quarter results to 6.8-7.8 per cent.
“We should not miss the current second wave of foreign investments into the region, especially now that we have finally become an investment destination of choice,” Economic Planning Secretary Emmanuel Esguerra announced.
The country was recovering from a period where it “was largely ignored by the first wave of foreign investments into the region during the mid-1980s due to political instability”, Esguerra said.
Investors fear President-elect Rodrigo Duterte, who will take power from Benigno Aquino at the end of June, could derail this process. Duterte said he would focus on ending crime and corruption, while entrusting economic policy to others. His camp promises to maintain Aquino’s successful macroeconomic policies and pledges to increase infrastructure spending to 5 per cent of GDP as well as relax restrictions on foreign investment, although Duterte himself declares that he is confused by economic policy.
That has provided investors with more certainty after the divisive presidential election campaign dominated by the tough-talking mayor who won support with his outrageous pledges to fight crime.
If “the Punisher” can maintain the healthy investment environment and avoid political turmoil, the growth will probably continue.