Philippine Economy teetering at 0.4 percent GDP growth

Weighed down by the impact of the US financial meltdown and the global crisis, historic declines in manufacturing and trade sent the Philippine economy into hiccups, albeit afloat, with a GDP growth of 0.4 percent from 3.9 percent. The insipid growth in GDP drew on the positive contributions of Construction, Agriculture, Transportation, Communication and Storage, Mining and Quarrying, and Private Services. On the expenditure side, little growth drivers were Construction, Import of Non Factor Services, Personal Consumption Expenditure (PCE), Export of Non Factor Services, and Government Consumption Expenditure.

Notwithstanding the difficulties faced by the global economy, the demand for the services of our OFWs continued to heighten as their increased deployment contributed to the hefty growth of Net Factor Income from Abroad (NFIA) of 40.8 percent from 36.2 percent last year, pushing GNP to grow by 4.4 percent from 6.4 percent the previous year.

A big challenge to the economic managers during the remaining month of the second quarter is the fact that the Philippine economy is now teetering into recession as seasonally adjusted GDP sank by 2.3 percent, the lowest for the past 20 years. The seasonally adjusted GNP likewise declined by 1.2 percent, marking the first time since the first quarter of 2001 when both GDP and GNP contracted quarter on quarter. In addition, the Leading Economic Indicator for the second quarter breached into negative territory confirming the all too real threat of a recession.

On the production side, the Services sector remained the main, albeit slow driver registering a growth of 1.4 percent while AFF grew by 2.1 percent. For the first time since Q4 of 2001, industry posted a decline of 2.1%.

The seasonally adjusted AFF sector contracted by 1.0 percent in the first quarter after expanding by 0.9 in the last quarter with the declines of other crops, corn and sugarcane. Industry registered its lowest growth for the last twenty years as it sank by 6.6 percent from 0.1 percent gain in the last quarter. The substantial weakening of the manufacturing sector contributed immensely to the contraction of industry. Services sector posted no growth for the first quarter of 2009 compared to 0.2 percent recorded the previous quarter, as trade declined while other sub sectors slowed down. The sector has grown less than one percent in each of the last five quarters.

With projected population reaching 91.56 million and the domestic economy barely growing, per capita GDP declined by 1.5 percent, the first since the third quarter of 2001. Per capita GNP still grew, however by 2.4 percent from 4.4 percent while per capita PCE declined by 1.1 percent from its year ago growth of 3.1 percent.

Total compensation of the country’s OFWs was estimated at 6.33 billion dollars in the first quarter of 2009, up by 18.9 percent from the previous year’s 5.33 billion dollars. In peso terms, total compensation was valued at 302.16 billion, up by 38.5 percent from 218.11 billion pesos in 2008.