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The gross domestic product (GDP), the value of goods produced and services rendered, not including income from abroad, grew 7.5 per cent from the second quarter of 2006, bringing to 7.3 per cent the average growth in the first semester.

It was the highest annual growth rate since the 7.7 per cent growth rate recorded in the third quarter of 1986, the year dictator Ferdinand Marcos was overthrown.

It outshone the second-quarter GDP performance of Asian neighbours, such as Malaysia, Hong Kong and Indonesia, but trailed Singapore's 8.6 per cent and China's 11.9 per cent expansions.

The National Statistical Coordination Board (NSCB) said the first-quarter GDP growth was 7.1 per cent, revised from 6.9 per cent.

The gross national product--the GDP plus income from abroad, like remittances by overseas Filipino workers--expanded 8.3 per cent, a substantial improvement over the 6.4 per cent growth in the same quarter last year. Net factor income from abroad grew 16.6 per cent.

A beaming President Gloria Macapagal-Arroyo said, "Our economic plans succeeded."

"No one thought that we could get more revenues, cut down on tax cheats, strengthen the peso and move the stock market. No one thought we could bring our budget into the balance, repay our debts and increase jobs, but we have done it," she said at a televised news conference.

Arroyo said the economy was on track to a full-year growth of 6.1-6.7 per cent in the GDP.

Analysts, however, said it would be difficult to sustain the back-to-back growth of over 7.0 per cent seen in the first two quarters.

"The global credit market squeeze and softness seen in the United States could culminate in slower global demand. So, from the investment point of view, things will slow down," said Vishnu Varathan, an economist at Forecast Pte Ltd.

"So will exports, as demand for items like electronics take a hit. This, of course, will weigh on the domestic economy, which is to some extent still reliant on exports," he said.

Estrella V Domingo, acting NSCB secretary general, attributed the economy's strong performance to "continued favourable economic conditions such as stable interest rates and strong peso, resilient agriculture sector, vibrant industry and services sectors, plus election-related spending and intensified infrastructure investments."

Augusto Santos, acting secretary of economic planning, said the country could not afford to be complacent.

"We have to continually raise the bar to ensure the economy's solid growth, so that economic gains increasingly benefit the Filipino people," Santos said at the televised news conference.

Data from the NSCB showed that of the three major sectors, services posted the highest growth at 8.4 per cent in the second quarter, compared with 6.7 per cent in the same period last year. The strong performance was partly attributed to the booming business process outsourcing industry, which includes call centers.

The industry sector also performed strongly, growing eight per cent in the second quarter as compared with 4.5 per cent in the same period last year. This was largely due to a 33 per cent growth of the mining and quarrying sub-sector and 21 per cent in construction.

Philip Romualdez, president of the Chamber of Mines of the Philippines, said the mining sector's strong growth was only the beginning, with US$1.5 billion in investments expected next year after an estimated $500 million this year.

Because of unfavorable weather, the agriculture, fisheries and forestry sector grew by a minimal 3.9 per cent, slightly up from 3.8 pe rcent in the second quarter of last year.

Almost all sub-sectors of agriculture posted a slowdown, including rice, corn, coconut, banana, sugarcane, livestock and poultry.

Bad weather remained a risk in the second half, Santos said. But he said its ill effects were expected to be offset by the positive performance of the services and industry sectors.

Merchandise exports also slackened, growing 5.9 per cent as against 21.7 per cent in the second quarter of last year.

Merchandise imports decreased 12.3 per cent, a reversal from a 4.1-per cent increase a year earlier.

President Arroyo said an increased budget allotment for infrastructure spending this year helped to pump-prime the economy.

Public construction, which takes into account government spending on infrastructure, grew 39.6 per cent in the second quarter, compared with 11.8 per cent in the same quarter last year, NSCB data showed.

Private-sector investments in infrastructure grew 2.5 per cent, after a  four per cent contraction in the second quarter of 2006.

Consumer spending increased six per cent in the second quarter from 5.4 per cent a year ago, boosted by an upsurge in money remittances from overseas Filipino workers.

Expenses for fuel, light and water rebounded and grew six per cent, compared with a 2.2 per cent decrease in the second quarter of 2006. Other items that recorded higher growths were beverages (4.8 per cent, from negative 1.8 per cent a year earlier), clothing and footwear (5.6 per cent, from 1.6 per cent) and miscellaneous expenses (6.1 per cent, from 3.8 per cent).

Food, which accounted for 52.7 per cent of total personal consumption expenditure, maintained its growth pace of 6.4 per cent.

Finance Secretary Margarito Teves said in a statement that the economic growth would help the national government achieve its revenue collection target for the year, because higher income means higher tax collection.

Teves said it was necessary to meet the government's revenue goal so it could further pump-prime the economy. He added that more revenues to fund social services could help ensure that the benefits of higher growth would trickle down to the poor.

- By Business Desk

Philippine Daily Inquirer

Publication Date: 31-08-2007