The manufacturing sector’s strong performance in the first three months of the year likely boosted the country’s GDP growth in the first quarter, according to the National Economic and Development Authority (Neda).
On Monday Socioeconomic Planning Secretary Ernesto M. Pernia told reporters that first-quarter GDP growth likely reached 7 percent. In order to reach the country’s full-year target of 7 percent to 8 percent, he said GDP growth must reach at least 7 percent per quarter.
“We expect, at least hope, that first-quarter GDP growth rate would at least touch 7 percent or hover around 7 percent,” Pernia said.
Neda Undersecretary for Planning and Policy Rosemarie G. Edillon told the BusinessMirror that manufacturing growth, which grew above 20 percent in January and February, caused GDP to expand faster.
Data from the Philippine Statistics Authority (PSA) showed that the Volume of Production Index (VoPI) grew 24.8 percent in February and 21.9 percent in January. PSA data also showed that the Value of Production Index (VaPI) grew 23.6 percent in February and 20.4 percent in January.
“Of the numbers in the first quarter, what is promising is the growth of manufacturing. In the first two months, it posted very high growth,” Edillon said. “It’s really in anticipation of infrastructure buildup and, of course, higher demand for export products.”
However, Edillon said slower exports growth could have dampened the country’s economic performance in the first quarter. PSA data showed that the country’s export earnings grew by 3.5 percent in January and contracted by 1.8 percent in February. Edillon noted this was the first time the Philippines recorded a contraction in export earnings in two years.
While it is too early to say if this will be a trend moving forward, Edillon said the decline in export earnings in February was due to the decline in coconut oil, pineapple and garment exports.
PSA data showed that, in February, coconut- oil exports declined 56.5 percent; canned pineapple, 35.6 percent; pineapple juice, 100 percent; pineapple concentrates, 43.1 percent; and garments, 32.8 percent.
Edillon said the decline in coconut-oil exports may have been because of the “resurgence” of palm oil in the market. It also does not help that the price of coconut oil is double that of palm oil.
Based on the World Bank’s Commodities Price Data, coconut-oil prices averaged $1,258 per metric ton, while palm oil averaged $674 per MT.
In terms of the export of pineapples, Edillon said the decline may be supply-related, since most of the country’s pineapples come from Mindanao.
For garments, Edillon said the country may have temporarily suffered from the expiration of the Generalized System of Preferences of the United States last year. The US Consolidated Appropriations Act, which extended the GSP of the Philippines, was signed only last month.
Edillon said that, through the US GSP, the country exports baby and children’s clothes to establishments like K-Mart and Target. She said many of these factories are based in Taytay, Rizal.
“Factories stopped production because they thought the US GSP would end in December of last year,” she said.
Contrary to what some experts said, Pernia said inflation will not have a huge impact on GDP, even with the Tax Reform for Acceleration and Inclusion law in place. He said the finance department estimated that the TRAIN law will only have an impact of 0.4 percent, which is “negligible.”
Pernia stressed that should there be increases in inflation, this will be caused mainly by higher oil prices; seasonal factors, especially when it comes to food items; and speculative factors.
“Other speculative factors would be merchants who are just raising prices because they’re able to point to the TRAIN and oil prices and the depreciation as the cause. So I think (the law’s impact) has been exaggerated,” Pernia said.