Moody’s unit says government Q3 GDP steady at 5.5%

Published on Tuesday, 27 November 2012 21:32

Written by Jun Vallecera

Local output measured as the gross domestic product (GDP) was seen sustained in the third quarter averaging 5.5 percent, according to a unit of the global ratings firm Moody’s Investors Service.

This was slower than actual growth averaging 6 percent in the second quarter, which was a revision from originally reported growth of 5.9 percent.

In a research note released on Tuesday, Moody’s Analytics said the Philippines likely pushed ahead during the period no matter the weak global environment and grew another 5.5 percent.

“The Philippines is expanding above its long-run potential rate, thanks to strong government spending and foreign direct investment, which have offset weakness in exports,” Katrina Ell, associate economist at Moody’s Analytics, said.

She acknowledged that the forecast third-quarter expansion was slower than the actual growth of 5.9 percent, which the government only recently scaled up to 6 percent instead.

“Also working in the country’s favor is a thriving services sector, which accounts for just more than half of GDP and has been growing at an average 6-percent annual rate for the past 10 years. Business-process outsourcing has been a recent driver, boosted by the government’s active encouragement of foreign investment.

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“The often volatile agriculture sector took a hit in the third quarter as bad weather caused significant damage to crops. The Philippines experiences 20 typhoons a year on average, and the storms tend to be concentrated in the third quarter,” the economist said.

She also said remittances that contribute the equivalent of around 10 percent of local output have proved resilient in the face of global weakness.

“Remittances were up 5.9 percent year to date in September over the same period in 2011. This was better than expectations, as remittances barely rose during the global downturn,” Ell said.

In summary, Ell said foreign investment and increased public spending during the period allowed the economy to expand at a quick pace and enough to offset weakness in foreign demand best illustrated by the country’s export performance.

Exports grew by only 7.2 percent in the first nine months to $40.07 billion or significantly slower than target growth of 10 percent.

The agriculture sector also took a hit after bad weather damaged crops and created temporary supply disruptions.