Gross Domestic Product grows 3.2 percent in 1999

It's good but not quite.

The country's economy emerged better than expected in 1999, growing by 3.2 percent and boosting prospects of higher growth this year.

But the news was received with no enthusiasm by investors.

Socio-Economic Planning Secretary Felipe Medalla said the country's gross domestic product (GDP) grew 4.6 percent in the fourth quarter of last year, leading to a full-year growth of 3.2 percent after a contraction of 0.5 percent in 1998.

He added that the Philippines' gross national product (GNP) also grew by 3.6 percent last year compared to 0.1 percent in 1998.

GDP and GNP measure the total output of goods and services of the country, but GNP also includes the billions of dollars sent home each year by overseas Filipino workers.

Economists had predicted earlier this week that last year's fourth quarter figure would come in at 4.12 percent and the full 1999 growth at 3.02 percent.

They noted that the strong growth in the fourth quarter, especially in the crisis-hit manufacturing sector, should pave the way for a broader recovery in 2000.

"The growth is not unremarkable considering what the economy has gone through and compared with forecasts," said Medalla who pointed out that the growth came despite the "debt workout and restructuring" of many industries.

"On the basis of the fourth quarter data, we remain confident that the economy will grow further this year," he stressed.

Medalla noted that they are expecting higher growth in 2000 as corporations finish their debt workouts and prepare for expansion in the next few years.

"With the corporate sector's improved financial standing, the government is confident of a four to five percent GDP growth target this year," he said.

Medalla reported that all sectors grew in 1999, the growth having been propelled by the strong rebound of the agriculture sector.

Agriculture production rose 7.4 percent in the fourth quarter and 6.6 percent for all of 1999. In 1998, the sector's output plunged 6.6 percent because of droughts and floods brought by the La Niña and El Niño weather patterns.

The fourth quarter growth was marked by a relatively strong rebound in the manufacturing sector, which expanded 3.1 percent from 2.4 percent in the third quarter. For the full year, manufacturing grew 1.4 percent after contracting 1.1 percent in 1998.

The sector was hard hit by the Asian financial crisis and recovered only slowly for most of last year.

Economists said the data show clear signs that the recovery is extending beyond the gains in agriculture production.

"The important thing is the broadening of the recovery... and that agriculture isn't the sole driver of growth," said David Fernandez, regional economist of JP Morgan.

Meanwhile, Medalla stressed that the economy's prospects for this year hinge on the implementation of key economic reforms, citing pending legislation on the liberalization of the power sector.

He also noted that the services sector should continue its "steadfast performance," having expanded by 3.9 percent in 1999.

Set against the stronger growth rates of many Asian countries hit harder by the crisis, however, the Philippine growth rate appears to be lagging badly behind.

The Bank of Korea has said South Korean GDP should grow 10.2 percent in 1999, while in Thailand the central bank has put the figure at four to five percent.

Malaysia's economy, on the other hand, is likely to grow five percent, while in Singapore economists have predicted a 5.4 percent growth for last year.

China's official Xinhua news agency has said the economy grew 7.1 percent in 1999, but the figure was announced last Dec. 29 and is likely to be a preliminary estimate.

Only Hong Kong and violence-racked Indonesia are likely to post lower growth in 1999. The two countries are expected to post two and 0.1 percent growth, respectively.

Medalla explained that forecasts for growth in 2000 in the country are slightly more upbeat, but still lag in the region.

He said growth in agriculture is expected to slow down to about three to 3.5 percent this, but the industry sector should expand by 4.5 percent for an overall growth of four to five percent.

The economic growth report, meanwhile, was received with no enthusiasm by the country's investors.

Jose Ricardo Garcia, president of Diversified Securities, said the stock market was not "too happy." He said investor sentiment in the Philippines has been badly knocked by concerns over President Estrada's management of the economy and allegations of corruption and cronyism in his administration.

"The market is looking at other factors, especially political issues. More than the economy, it's a question of leadership and policy," he said. - With wire services