THE absence of election spending and base effects on the industry sector could have caused the economy to slow in the first three months of the year, according to the National Economic and Development Authority (Neda).
Neda Director General Cayetano Paderanga Jr. said the economy likely grew by only 4.8 percent to 5.8 percent in the first quarter.
In 2010 gross-domestic product (GDP) growth for the full year was 7.3 percent, the highest in 34 years.
The first-quarter growth estimate this year, Paderanga noted at the Communication and News Exchange Forum at the Philippine Information Agency in Quezon City, is still based on constant 1985 prices. The government is already migrating all of its income-accounts data to constant 2000 prices when it announces the actual growth figures next week.
One of the growth drivers in the first quarter (this year) was agriculture, he said. “Actually, what happened was that the industry went down to the more normal level so it’s a little lower because of the base effect of 2010. Services was growing at relatively healthy rates, so we’re hoping that [the slower growth was only due to] the loss of election spending and the base effect. We hope that the momentum is still there,” Paderanga explained.
Earlier, Paderanga said he expected GDP to be higher than 6 percent on the back of the strong performance of the agriculture sector of 4.1 percent, the highest in seven years.
The Department of Agriculture attributed this to a record-high palay production, which grew by 15.63 percent to 4.04 million metric tons.
But Paderanga said the government was keeping its 7-percent to 8-percent GDP target this year. This means, Paderanga said, the economy must grow by around 7 percent in the next three quarters to meet the target.
He said the Development Budget Coordination Committee would start reviewing the targets after the first-quarter results come out.
The National Income Accounts for the first quarter will be released by the National Statistical Coordination Board on May 30.
“We’ll need around 7 percent for the next three quarters, and then we’ll see how we adjust. What we would like to see, of course, is an escalating level [of growth],” Paderanga said.
Former Asian Development Bank chief economist Ernesto Pernia said attaining the full-year growth of 7 percent to 8 percent might require an average growth of more than 7 percent and 8 percent in the next three quarters.
Pernia said the low end of the government’s target would be more feasible if the economy would post at least a 7.5-percent growth in the second to fourth quarters. This, he said, will make up for the shortfall in GDP growth in the first quarter, which he expects will see GDP hitting a growth of around 5 percent.
He said the factors that would cause a slowdown in growth in the first quarter would include inflation, which dampens consumption, lower overseas Filipino remittances and slower investment and export growths.
“I think it [growth in the first quarter] would probably be around 5 percent. Growth could be lower because of inflation, which dampens consumption and investments, as well as remittances that have posted positive but lower growth. Investment was rather weak in the first quarter,” Pernia said.
Meanwhile, University of Asia and the Pacific economist Victor Abola said the estimate of the Neda was lower than his expected 6-percent growth, mainly because of the growth of agriculture, the double-digit growth of the manufacturing output and growth in the mining sector.
The strength of the agriculture and manufacturing sectors, Abola explained, would also impact on services through transportation and communication services.
Abola said that when there is higher agriculture production and a strong manufacturing sector, transportation costs also increase because of the need to transport these goods.
