Philippine unexpected growth beat all estimates in a Bloomberg News survey of 22 economists.
The country's economy posted better than expected growth in the first quarter of 2013 (January-March), lifted by strong manufacturing and construction sectors, and cementing views the central bank will leave its key policy rate on hold for the rest of 2013.
With the Philippines facing export headwinds as global growth shows signs of an extended slowdown, analysts expect the central bank to tweak some policy levers to support domestic consumption.
Gross domestic product expanded a seasonally adjusted 2.2 per cent in the first quarter over the prior three months, faster than the upwardly revised 1.9 per cent in October-December, and above a market forecast of 1.6 per cent.
The quarterly rate was the fastest since the first quarter of 2012, when it grew at the same pace.
From a year earlier, the economy grew 7.8 per cent, helped by increases in public and private spending, making the Philippines the fastest growing economy in Asia as it nudged ahead of China's growth of 7.7 per cent on an annual basis and 1.6 per cent quarter on quarter.
The Philippines' annual GDP figure was also higher than 6.1 per cent growth forecast in a Reuters poll.
The January-March data marked the third consecutive quarter of above 7 per cent annual growth for the Southeast Asian country, with the yearly growth rate in the period the highest for any single quarter during the three-year-old Aquino administration, the economic planning agency said in a statement.
The export-reliant Philippines is facing some risk that demand for its high-tech products will slow on more evidence that global growth is losing momentum.
"We remain vigilant of the downside risks; disasters can negate the gains and push back development. The global economy remains fragile," economic planning chief Arsenio Balisacan told reporters, adding capital inflows were also another risk.
Markets' reactions to the data were mixed. The peso was off early lows and was quoted at 42.35 per dollar at 02.16 GMT from a low of around 42.515 in early deals. But the Philippine stock market was down about 1 per cent.
Economists said the central bank would most likely leave its key overnight borrowing rate on hold for the rest of the year, with inflation forecast to stay within the central bank's 3 to 5 per cent target band this year despite strong growth.
The central bank next meets to review policy on June 13. It has kept its policy rate steady at a record low of 3.5 per cent since December 2012, but has slashed the rate on its special deposit account (SDA) facility by more than 200 basis points since July 2012 to divert credit to more productive use.
"We think the BSP (Bangko Sentral ng Pilipinas) will continue to cut the SDA rate to lift domestic spending as well as save costs," said Trinh Nguyen, economist at HSBC in Hong Kong.
With the outlook on exports still murky, domestic consumption will remain as the main driver for economic growth this year. Manila is targeting growth of 6 per cent to 7 per cent in 2013 after a revised 6.8 per cent expansion the prior year. Domestic demand is seen holding up well in 2013, underpinned by strong remittances, low inflation and record-low borrowing costs.
Economists in the same poll forecast full-year 2013 growth of 6.2 per cent, slower from the previous year but better than the 5.9 per cent estimate in a Reuters quarterly poll in April.
National Economic and Development Authority director general and Socioeconomic Planning Secretary Artemio Balisacan said the country grew fastest in Southeast Asia, even overtaking growth rates of neighbors China and Indonesia having 7.7 percent and 6 percent respectively.
"Impressive performance of these sectors prove that the country is already reaping the benefits of strengthening priority sectors that are potential growth drivers and employment generators," said Balisacan. "Business confidence and consumer optimism fuelled this growth, putting to rest doubts cast on the 2012 figures as being due to base effects only."
"The numbers speak for themselves. The numbers exceeded market forecasts, including my own," Balisacan added.
He also said the impressive growth of various sectors would also generate employment for Filipinos.
In 2012, the Philippine economy grew 7.1 percent
Pineapples are stacked on a truck at a Dole Food Co. plantation in Polomolok, South Cotabato, Mindanao, the Philippines. Exports, which make up the equivalent of about 30 percent of the economy, fell in two out of three months through March, data showed. photo: SeongJoon Cho/Bloomberg
Growth sectors
Albert said the robust growth was boosted by the strong performance of manufacturing and construction, backed up by financial intermediation and trade.
Increased domestic demand led to the local manufacturing sector growing at 9.7 percent while the construction sector grew by 32.5 percent in the first three months of the year.
"Initially, this was led by infrastructure spending of the government. By the second half of 2012, private construction started to rebound," said Balisacan.
On the other hand, Albert cited the continued inflow of remittances from overseas Filipino workers, which accelerated the Net Primary Income from the rest of the world to grow by 3.2 percent.
This boosted the Gross National Income (GNI) growth to 7.1 percent from 5.7 percent in 2012, according to the NSCB chief.
The agriculture sector also grew by 3.3 percent as the fisheries subsector bounced back to a growth of 5.5 percent during the first quarter.
Capital formation spurred overall growth with its 47.7 percent expansion, according to Balisacan.
"For the first time, expenditure in capital formation, including other private sector investments such as on durable equipment, contributed more to growth than household consumption expenditure," the Cabinet official said.
Government consumption also grew by 13.2 percent due to state support for social programs such as the Pantawid Pamilyang Pilipino Program.
Balisacan is also expecting the growth to be sustained regardless of the sluggish growth of developed countries.
"Despite what's happening in other countries, (the global economy) will not hamper our growth," he said.
Inclusive growth?
Meanwhile, Presidential Communications Development and Strategic Planning Secretary Ramon Carandang said the government is not resting on its laurels with the faster-than-expected growth in the first quarter.
"Our challenge is to sustain the growth and ensure that all Filipinos feel its positive effects," he said on Twitter.
A recent survey has reported that some 1.1 million young Filipinos have joined the unemployed and underemployed pool of 10.05 million this year and a reverse migration which the country currently experiencing could also affect the figure.
There has also been little change in poverty and hunger figures, standing at 27.9 percent in early 2012.
Related story: The Grim Reality Behind the Philippines' Economic Growth
"To address this, we need to create more jobs than that number," Balisacan said.
Meanwhile, Abigail Valte, deputy presidential spokesperson, said the Aquino administration remains focused on fostering inclusive growth.
"Since our administration took office, we have worked to drastically expand social safety nets to help the most vulnerable in our country...The recent election results show that the public has confidence in the President, and agrees with the direction the country is going. Therefore, our administration will continue to promote and expand policies that lead to a Philippines where no one is left behind," Valte said in a statement.
2012 growth figures revised
On Wednesday night, the NSCB also revised the 2012 annual GDP growth figures from 6.6 percent to 6.8 percent.
"The revision was brought by the upward revisions in Public Administration and Defense: Compulsory Social Security (PAD), Mining & Quarrying, Other Services, and Construction," the NSCB said.
Net Primary Income was similarly revised upward from 3.3 percent to 4.8 percent which consequently resulted in an upward revision of GNI for 2012 from 5.8 percent to 6.5 percent.
In contrast, the 2011 GDP growth figure was revised downward from 3.9 percent to 3.6 percent due to the revisions in Construction, Other Services and Real Estate, Renting & Business Activities.
The GNI for 2011 was also revised downward from 3.2 percent to 2.8 percent.
Meanwhile, GDP growth figure for fourth quarter of 2012 was revised upward from 6.8 percent to 7.1 percent due to upward revisions in construction, financial intermediation and PAD.
"Released last January 2013, the preliminary GDP estimates for said quarter were based from limited data available 15 days after the reference period," the agency said.
With report from Financial Times, Bloomberg and philSTAR
