Philippines economy grows 4.9% in first quarter

Tuesday, 31 May 2011 00:00 - - {{hitsCtrl.values.hits}}

MANILA, (AFP) - The Philippines said Monday economic growth slowed to 4.9 percent in the three months to March as it was hit by a drop in global trade and less spending on infrastructure.

The National Statistical Coordination Board said first quarter growth was well down from the 8.4 percent in the same period last year, when activity was boosted by election-related spending.

“Underspending by the government and the slowdown in global trade constricted the economy to a lower growth... of 4.9 percent in the first quarter,” the agency’s secretary general Romulo Virola said in a statement. The growth figures were at the lower end of the government’s 4.8-5.8 percent forecast.

President Benigno Aquino said the government would make up for the modest growth by accelerating spending during the rest of the year.

“This is why we will be pump-priming, especially in the second quarter,” Aquino told reporters after the gross domestic product figures were announced.

Aquino said preparations for reforms in the public works sector had slowed spending earlier this year, but that these were now in place and the spending could now increase.

He also expressed confidence that the fall in oil prices and the entry of more foreign investment would further improve growth rates in the coming months.

“So we think that these numbers will start looking better,” Aquino said.

The government said earlier it was aiming for a full-year GDP growth of seven to eight percent.

Gross national income, which includes income from abroad, expanded 3.6 percent from 11.5 percent the previous year.

The drop in the growth rate was partly due to political crisis in the Middle East and North Africa, a key source of remittances from overseas-based Filipino workers, as well as the appreciation of the local currency, officials said.

“The economy posted a respectable growth amidst the geopolitical tensions in the Middle East and North Africa, the rising oil prices, and the contraction in public spending,” Socio-economic Planning Secretary Cayetano Paderanga said.

However Security Bank economist Patrick Elia said the slowdown was due to higher inflation and warned that this would remain a major concern for the rest of 2011.

“We are really seeing the effects of an elevated inflation environment. We were doing well in a low inflation environment but once inflation hit, a lot of things had to be adjusted,” he said.

Earlier this month, it was announced that inflation in April rose a higher-than-expected 4.5 percent, up from 4.3 percent in March.