Philippines surprises with strong Q2 GDP growth


Manila is frequently battered by tropical cyclones, but fears of a drought caused by El Nino are dampening forecasts for future GDP growth

MANILA, Philippines -- The Philippines' gross domestic product grew 4.5 percent in the second quarter of 2002, surprising analysts and putting the country's economic growth ahead of most of the region.

"The Philippine economy turned in a pleasant surprise in the second quarter of 2002 by growing at a rate that exceeded even NEDA projections," said Dante Canlas, Socio-economic Planning Secretary at the National Economic Development Authority.

Predictions from the market and the government put GDP growth at 3.9 percent for the quarter.

A stronger-than-expected surge in industrial output more than compensated for a slowdown in agricultural growth, according to NEDA.

Quarter-on-quarter GDP growth was 2.3 percent, the highest since the second quarter of 1997.

GDP growth outpacing most of the region

The impressive GDP figures rival the rest of the region, with Malaysia, Singapore, Taiwan and Indonesia all lagging behind.

Only China's eight percent and South Korea's 6.3 percent GDP growth were higher than the Philippines' 4.5 percent.

"It's certainly pretty high," said Jojo Gonzales, head of research at Philippine Equity Partners, in a Reuters report.

"The major difference in performance is industry, that's the only sharp change."

Strong exports underpinned the industrial sector, which grew 4.3 sequentially, compared to 1.3 percent in the first, buoyed by a 15 percent rise in merchandise trade exports.

Agriculture growth fell, as expected, down to 2.4 percent from 4.6 percent.

Growth hard to sustain

However, economists told Reuters that such growth would be hard to sustain through the rest of the year, as worries emerged over the economic recovery in the United States and the possibility of a drought caused by the El Nino weather pattern.

Song Seng Wun, an economist at GK Goh Securities told Reuters, "We do not think (the economy can sustain this pace of growth)," noting that the electronics manufacturers agency had lowered its export growth forecast for the year.

The government was also cautious, noting that despite sticking to its 4 to 4.5 percent growth target for the year it could reach the mid point or high end of that range.

The Philippine Exchange closed up 0.25 percent to 1,111.91 on the news after opening weaker.