We are pleased to note that the first quarter real GNP and real GDP grew by 3.45 percent and 3.40 percent, respectively. Albeit lower than the government’s expected growth rates for the first quarter, these are notably higher than the 1.5 percent real GNP and the 0.7 percent real GDP growth rates posted in the same quarter of the previous year, providing solid evidence that the domestic economy has sustained the recovery process.
The first quarter output growth was buoyed mainly by the strong rebound of the industry sector and the continued resilience of the services sector. Industry grew by 4.8 percent in the first quarter, higher than the government’s target growth rate of 4.1 percent and a reversal of the 3.6 percent contraction recorded in the same quarter of the previous year. Similarly, services expanded by 3.8 percent. While this was lower than the government’s target rate of 4.5 percent, it was higher than the 3.2 percent growth rate in the first quarter of 1999. On the other hand, growth in the agriculture sector fell to 0.2 percent, lower than the expected growth of 2.2 percent and the 2.9 percent growth rate in the same period of the previous year. The slack in agriculture growth was due mainly to the reduction in palay and corn production by 4.6 percent and 20.2 percent, respectively.
On the demand side, the 3.45 percent real GNP growth was supported by a recovery in investments, the strong performance of exports, and sustained growth in private consumption. Investments expanded by 3.0 percent in the first quarter, a turnaround from the 5.9 percent contraction in the same period of the previous year. Similarly, exports grew by 13.5 percent as against the 8.4 percent contraction in the first quarter of 1999. Meanwhile, personal consumption expenditure growth increased to 3.2 percent from the 2.5 percent growth in the same period of the previous year. By contrast, government consumption contracted by 1.9 percent, a sharp decline from the 7.9 percent growth posted in the first quarter of 1999. This was on account of the government’s initiative to tighten fiscal spending to achieve the P62.5 billion deficit target for 2000. Together, these developments suggest that the private sector has started to pick up the reins of economic growth.
The 3.4 percent real GNP growth in the first quarter is still consistent with a 4.0 percent full-year real GDP growth in 2000. The foreseen growth in the agriculture sector in the next two quarters as reflected in the projections of the department of agriculture is expected to further strengthen output growth in the remaining quarters of the year.
We expect the favorable growth performance in the first quarter to be sustainable considering that this was achieved in an environment of stable interest rates and low inflation. Inflation, which averaged 3.2 percent in the first four months of the year, was the lowest recorded rate in thirteen years. The recent structural reform initiatives of the government and the return of stability in the foreign exchange market are also expected to further boost investors confidence and help in the sustainability of the recovery process.
To help sustain the positive real sector performance, monetary policy in the remaining months of the year will be focused on ensuring the sustainability of economic growth through the provision of adequate liquidity consistent with price stability and broadly stable financial market conditions.