For the first quarter of this year, the Philippines managed to be the third best performing economy in Asia, posting 1Q07 GDP growth of 6.9%, after China's spectacular 11% and Vietnam's 7%++. This is the country's best quarter performance in 17 years.
Looking at the numbers, services propelled the growth, rising by 9.1%, followed by industry at 5.3%. Again, this underscores the fact that our economy is increasingly services-dependent. The BPO or call center phenomenon is clearly behind this.
At the consumption side, consumer spending rose 5.9% (from 5.3% a year ago), again this is an indicator that there is an upwared pressure on inflation, tempered only by low interest rates, a stronger peso and stable global oil prices. Clearly, the massive inflows of OFW remittances fuel consumer spending which in turn pushed retail services upwards as well.
Capital formation, however, remains worrisome, growing only by 0.6% from 0.3% last year. This means (1) domestic investments (or business ventures put up by locals) remain low and (2) foreign investments, despite moves to liberalize and open up previously restricted sectors like mining, haven't really been significant. Maybe because our economy is heavily biased in favor of services-oriented sectors, the focus has shifted away from the traditional source of growth- manufacturing- which has unfortunately been lagging behind. What is clear is that imports of durable equipment have contracted this quarter (I forgot the figures) compared to year-ago levels.
The benefits on account of the low interest-rate, low inflation and stronger peso scenario have not yet been fully felt in some sectors, particularly manufacturing. Services, agriculture, and to a certain extent exports, have all registered gains.
I will reserve my applause once the manufacturing sector gathers momentum and when capital formation actually shows signs of sustainable growth.
Looking at the numbers, services propelled the growth, rising by 9.1%, followed by industry at 5.3%. Again, this underscores the fact that our economy is increasingly services-dependent. The BPO or call center phenomenon is clearly behind this.
At the consumption side, consumer spending rose 5.9% (from 5.3% a year ago), again this is an indicator that there is an upwared pressure on inflation, tempered only by low interest rates, a stronger peso and stable global oil prices. Clearly, the massive inflows of OFW remittances fuel consumer spending which in turn pushed retail services upwards as well.
Capital formation, however, remains worrisome, growing only by 0.6% from 0.3% last year. This means (1) domestic investments (or business ventures put up by locals) remain low and (2) foreign investments, despite moves to liberalize and open up previously restricted sectors like mining, haven't really been significant. Maybe because our economy is heavily biased in favor of services-oriented sectors, the focus has shifted away from the traditional source of growth- manufacturing- which has unfortunately been lagging behind. What is clear is that imports of durable equipment have contracted this quarter (I forgot the figures) compared to year-ago levels.
The benefits on account of the low interest-rate, low inflation and stronger peso scenario have not yet been fully felt in some sectors, particularly manufacturing. Services, agriculture, and to a certain extent exports, have all registered gains.
I will reserve my applause once the manufacturing sector gathers momentum and when capital formation actually shows signs of sustainable growth.
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