The Philippine domestic economy remained strong in the first quarter of 2003 despite the Iraq war and the prevailing peace and order problems in Mindanao. The country’s Gross Domestic Product (GDP) increased by 4.5% from its 3.8% performance in the same quarter last year. Substantial gains in Net Factor Income inflows of 21.0% further pushed the Gross National Product (GNP) upward to 5.6% from 4.3% a year ago.

The improvements in the economy during the period translated to an increase in the real per capita GDP of 2.1%, higher than its 1.5% growth recorded in 2002. The increase in GNP also resulted in a substantial rise from 1.9% to 3.2% in the per capita GNP. Per capita PCE, likewise increased by 2.5%, from 1.1% in 2002.

The three major production sectors contributed positively to the growth of the economy, spearheaded by the services sector, which grew by 5.6% and shared 2.6 percentage points to the first quarter growth of GDP. Transportation, Communication and Storage (TCS) shared 0.7 percentage points to the growth of GDP even with its decelerated growth of 8.6% from its10.1% increase last year. Trading activities maintained its 5.5% growth in 2002 while Finance recovered from a 0.6% decline to a 5.0% upsurge this year. Ownership of Dwellings and Real Estate (ODRE) managed to grow by 3.1% while Private and Government services increased by 5.3% and 5.1%, respectively.

Manufacturing sector led the industry sector as it doubled its growth to 5.3% from 2.4% in 2002 and contributed 1.3 percentage points to GDP. This is the highest growth recorded for manufacturing since Q4 2000. Improvements were also observed in Construction and Utilities sectors with –3.2% and 3.1% growths compared to their 2002 growth of –7.7% and 1.7%, respectively. Meanwhile, Mining and Quarrying decelerated to 8.9% from its remarkable 49.3% growth in 2002 and this was largely attributed to the zero production from the Malampaya Oil Rim Project. The total industry sector managed to improve by 4.0 % against its 2.1 % growth in 2001,

After its strong performance in the fourth quarter of 2002, the combined AFF sector slowed down during the first quarter of 2003, recording a lower growth of 2.9 % from its 4.8% increment last year. The deceleration of the AFF was mainly due to the contraction in palay and other crops. Palay slid by 0.8% as against the 8.7% growth recorded a year ago while Other Crops declined by 1.4% from 3.7% a year ago as lower production was noted in pineapple, mango, coffee and cassava, among others. Despite the deceleration, the sector still contributed 0.6 percentage points to the growth of the economy.

On the expenditure side, Imports of goods and services increased tremendously with 24.2% acceleration during the quarter as compared to its –5.1% performance last year. Imports of goods shot up to 25.4% while imports of services posted a 6.9% increase. This is the first time that imports of non-factor services registered a positive growth since Q1 2001. Major contributors to the growth of merchandise imports are: Electrical Machinery (40.5%), Mineral Fuels (26.4%) and Base Metals (41.0%). Meanwhile, Exports of goods and services improved at a slower rate compared to imports with a 3.0% growth for Q1 2003 from -5.1% in 2002. The positive growth was mainly due to the 3.6% increase in merchandise exports as the top two merchandise exports, Semiconductors and Garments, posted double-digit gains of 12.0% and 12.4%, respectively.

As inflation is kept to low levels and with big increases in OFW remittances, consumer spending popped up to 4.9% from its 3.5% gains last year, contributing a significant 3.4 percentage points to GNP’s growth. Similarly, all the investment sub-sectors exceeded their last year’s performance as durable equipment and breeding stocks grew faster with 10.2% and 2.9% growths respectively. Furthermore, construction registered a smaller 1.2% decrease from its –5.0% growth a year ago. As a result, total fixed capital formation recorded a turnaround growth of 4.5% from its –2.4% performance in 2002.

Government consumption expenditure posted a minimal 0.5% decline in the first quarter of 2003, slightly lower than its –1.9% growth registered in the same period of the previous year.

PRESS CONFERENCE
on the
1st Quarter 2003 Philippine Economy
29 May 2003, 7:30 am
National Statistical Coordination Board
Makati City, Philippines

(from left:  Sec. Gen. Romulo A. Virola, NSCB; Dir. Gen. Romulo L. Neri, NEDA;
and Asst. Dir. Benjamin Turiano, DIS-NEDA)