Economy grows 3.8% in 3rd quarter

The economy grew at a slower 3.8 percent in the third quarter mainly due to the typhoons that pounded the farming sector. Government, however, stuck to its growth forecast of four to 4.5 for the entire year.

Gross domestic product (GDP) shrank a seasonally adjusted 0.1 percent in the third quarter from the second, posting a year-on-year growth of 3.8 percent. The government had expected 3.9 percent to 4.4 percent growth year-on-year.

"The GDP growth for the third quarter was below the lower end of the official target of 3.9 percent to 4.4 percent," National Statistical Coordination Board Secretary-General Romulo Virola said yesterday.

The third quarter result brought GDP growth to 4.1 percent for the first nine months this year compared with three percent growth in the same period last year.

The 3.8 percent third quarter GDP growth was down from the 4.8 percent year-on-year expansion in the second quarter of this year but an improvement from the three percent growth posted in the third quarter of last year.

Virola said seasonally adjusted GDP contracted 0.1 percent from a rise of 2.6 percent in the second quarter.

It was the first time in four years that the economy shrank on a quarterly basis.

Virola said gross national product (GNP), which includes income from abroad, grew 3.4 percent in the third quarter or by 4.2 percent for the first nine months.

He said agriculture fell in the third quarter due to poor production of key crops like rice, corn and sugarcane, while manufacturing growth declined, leading to the lower GDP growth this year.

Agriculture accounts for about a fifth of the economy.

The industry sector grew by 4.4 percent in the third quarter, as against only 1.9 percent last year, powered by the turnaround in mining and quarrying as well as in construction, which posted its first significant growth since the Asian financial crisis.

Services, paced by the transportation, communications and storage subsectors, improved by 4.9 percent, from 4.4 percent the past year, bringing its nine-month growth to 5.1 percent compared with the 4.2 percent expansion a year ago.

Economic Planning Secretary Dante Canlas said the economy was "still on track," to hit the government’s four-4.5 percent GDP growth target and 4.5- five percent GNP growth for the whole of 2002.

"The strong growth of industry and services indicates that the policies of (President Gloria Arroyo), designed for macroeconomic stability and long-term industrial restructuring are working," Canlas said.

He also said the agriculture sector is already showing signs of recovery in the last three months of the year while the services and industry sector remained strong.

"So far, all indicators... show no signs of slowing down or declining," he said.

Canlas blamed the fall in agricultural growth to typhoons and less planting by farmers who were anticipating the El Niño phenomenon would hit in late 2002.

From the viewpoint of consumption, Canlas said the overall resilience of the economy can be attributed to private sector demand, which grew at its fastest rate of 4.1 percent in four and a half yeas, along with the robust investments in fixed capital or actual projects.

Analysts expressed concern the Philippines would not attain its growth targets for the whole year.

Song Seng Wun, research head of GK Goh Securities said he did not expect agriculture to bounce back strongly in the fourth quarter.

"Overall GDP growth for the full year could be closer to 3.6 to 3.8 percent," he told AFX-Asia.

Julian Wee, an economist of Singapore research unit, IDEAglobal.com, said he now expects full-year GDP growth of 3.9 percent.

"The main disappointment is the agriculture sector and the services sector," he said.