Philippine Economy Posts 6.4 Percent Growth

HIGHLIGHTS First Quarter 2017

Philippine Economy Posts 6.4 Percent Growth in the First Quarter of 2017

Gross Domestic Product (GDP) posted a 6.4 percent growth in the first quarter of 2017. This was lower than the 6.6 percent growth in the fourth quarter of 2016 and the 6.9 percent growth in the first quarter of the same year.

Manufacturing, Trade, and Other Services were the main drivers of growth for the quarter.

Among the major economic sectors, Services had the fastest growth of 6.8 percent, albeit lower than previous year’s 7.5 percent growth. Industry decelerated to 6.1 percent as compared with the 9.3 percent growth recorded in the first quarter of 2016. Meanwhile, Agriculture recovered with 4.9 percent growth from a decline of 4.3 percent from the previous year.

Net Primary Income from the rest of the world (NPI) slowed down by 3.9 percent compared with the 9.4 percent growth recorded in the same quarter of the previous year. As a result, Gross National Income (GNI) posted a growth of 5.9 percent, slower than previous year’s growth of 7.3 percent.

On a seasonally adjusted basis, GDP grew by 1.1 percent and GNI by 1.0 percent. In the fourth quarter of 2016, their growths were 1.8 percent and 1.7 percent, respectively. The entire seasonally adjusted Agriculture sector posted a growth of 1.6 percent. Industry grew by 0.4 percent and Services by 1.4 percent. H - 2

With the country’s projected population reaching 104.1 million in the first quarter of 2017, per capita GDP grew by 4.9 percent. This was a slowdown from the 5.2 percent growth noted in the same quarter of the previous year. Meanwhile, per capita GNI and per capita Household Final Consumption Expenditure (HFCE) grew by 4.4 percent and 4.2 percent, respectively. These were both lower than the corresponding growths of 5.6 percent and 5.4 percent in the first quarter of 2016.

PRODUCTION SIDE

Agriculture, Hunting, Forestry and Fishing (AHFF)

The AHFF, which shared 9.1 percent to total GDP recovered with 4.9 percent growth in the first quarter of 2017. This pushed GDP up by 0.5 percentage point during the quarter.

Agriculture rebounds

Agriculture industry which shared 84.9 percent to the whole AHFF sector grew by 5.7 percent in the first three (3) months of 2017.

Growth in the industry was driven by the gains in Palay by 12.4 percent; Corn by 23.4 percent; Livestock by 3.2 percent; Agricultural activities and services by 5.1 percent; Other crops by 3.9 percent; Poultry by 1.9 percent; Banana by 2.5 percent; Pineapple by 3.8 percent; Sugarcane by 1.0 percent; Rubber by 17.8 percent; and Cassava by 1.5 percent from last year’s level.

On the other hand, declines were noted in the following: Coconut by 2.3 percent; Mango by 7.8 percent; and Coffee by 10.5 percent from previous year.

Forestry declines

Forestry dropped by 18.0 percent in the first quarter as compared with its growth of 11.2 percent in the same quarter in 2016. H - 3

Fishing recovers

Fishing which shared 15.1 percent to total AHFF, made a turnaround and increased by 0.7 percent in the first quarter of 2017. Major growth contributors were: Tilapia, Skipjack, Yellowfin tuna and Seaweed.

Industry

Industry decelerates

Industry grew by 6.1 percent in the first quarter of 2017. This was lower than the 9.3 percent growth in the same quarter of the previous year. This industry, which shared 34.2 percent to the GDP for the quarter, contributed 2.1 percentage points to the 6.4 percent GDP growth. Of the 6.1 percent growth in Industry, Manufacturing dominated the contribution with 5.4 percentage points during the quarter.

Mining and Quarrying plummets in Q1 2017

Mining and Quarrying declined by 20.0 percent in the first quarter of 2017 as compared with the 11.4 percent growth in the previous year. Nickel mining, the main contributor to the decline of the industry were Crude oil, natural gas and condensate, Copper mining, and Other non-metallic mining.

On the other hand, the rest of MAQ expanded: Stone quarrying, clay and sandpits by 13.9 percent, Gold mining by 10.0 percent, Chromium mining by 601.9 percent, and Other metallic mining by 17.8 percent.

Manufacturing tops GDP growth

Manufacturing continued to lead the growth of GDP with its 7.5 percent year-on-year growth.

Among the industries under Manufacturing, Food manufactures, which grew by 9.8 percent, was the biggest contributor to the growth of the industry with H - 4

3.6 percentage points. Other contributors to the growth were: Basic metal industries, with 58.6 percent growth; Petroleum and other fuel products, with 30.0 percent growth; Transport equipment, with 32.1 percent; and Electrical machinery and apparatus, with 17.5 percent.

On the other hand, the following industries posted declines and pulled down the growth of the sector: Textile manufactures, which declined by 36.8 percent; Publishing and printing, by 14.9 percent; Tobacco manufactures, by 10.9 percent; Paper and paper products, by 1.7 percent; and Machinery and equipment except electrical, by 0.4 percent.

Construction grows slower

Construction grew by 8.2 percent in the first quarter of 2017, slower compared with the 14.2 percent growth recorded in the same period last year. The growth for the quarter was mainly driven by Private Construction.

Electricity, Gas and Water Supply (EGWS) decelerates

Electricity, Gas and Water Supply recorded a 1.4 percent growth during the first quarter of 2017, slower compared with the 10.2 percent in the same period of the previous year. The growth was mainly due to Electricity as it grew by 1.9 percent but slower compared with the 10.1 percent growth in 2016.

Similarly, Water subsector expanded by 0.6 percent, slower than 9.7 percent growth in 2016. On the other hand, Steam declined by 5.1 percent during the period as compared with previous year’s growth of 11.7 percent. H - 5

Services

Services remains the biggest contributor to GDP growth

Among the three major economic sectors, Services remained the main driver of the economy, contributing 3.8 percentage points to the total GDP. The sector expanded by 6.8 percent in the first quarter of 2017. The growth, however, was slower than the 7.5 percent growth recorded in the previous year. All subsectors, led by Trade, Other Services, and Real Estate, Renting and Business Activities, contributed positively to the sector’s growth.

Transportation, Storage and Communication (TSC) decelerates

TSC posted a 4.9 percent growth, albeit slower compared with the 5.3 percent posted in the previous year. Communication, which shared 57.1 percent to the entire TSC sector, contributed 1.5 percentage points. It grew by 2.6 percent in the first quarter of 2017 but was slower than the 4.9 percent growth in the same period in the previous year.

The rest of the sub-industry also contributed positively to the growth of TSC: Land Transportation, up by 6.8 percent; Storage and Services Incidental to Transport, up by 10.7 percent; Air Transportation, up by 8.5 percent; and Water Transportation, up by 8.4 percent.

Trade slows down

Trade and Repair of Motor Vehicles, Motorcycles, Personal and Household Goods recorded 7.1 percent growth in the first quarter of 2017, slower than the 7.5 percent in the same quarter of 2016. Retail trade, which was the biggest contributor to the growth of the sector, grew by 7.4 percent growth, slightly slower than last year’s 7.5 percent. Wholesale trade likewise decelerated with 6.4 percent compared with the 6.9 percent growth in the previous year. H - 6

Meanwhile, the Maintenance and Repair of Motor Vehicles, Motorcycles, Personal and Household Goods registered a 5.0 percent growth, slower than the 11.3 percent growth noted in the same quarter of 2016.

Banking Institutions push growth of Financial Intermediation

The Financial Intermediation sector grew in the first quarter of 2017 by 7.4 percent. This was lower than the 9.7 percent growth recorded last year. The performance was largely due to Banks and Non-Banking financial institutions which grew by 9.7 percent and 4.4 percent, respectively. Likewise, Insurance grew by 6.1 percent growth and Activities Auxiliary to Financial Intermediation posted 5.6 percent growth this quarter as compared with the previous year growth of 10.9 percent and 11.2 percent, respectively.

Real Estate, Renting and Business Activities decelerates

RERBA posted a 6.9 percent growth in the first quarter of 2017, slower than the 8.7 percent growth recorded in the previous year. The growth was driven by Renting and other business activities which grew by 10.4 percent as compared with 17.2 percent in the same period of the previous year.

Meanwhile, Real Estate accelerated to 6.5 percent as compared with the 4.8 percent growth recorded in the previous year. Likewise, Ownership of Dwelling sped up to 3.0 percent from 2.6 percent growth in the first quarter of 2016.

Education dominates Other Services growth

Other Services grew by 7.6 percent in the first quarter of 2017, faster than the 7.3 percent growth in the same period in 2016. Education, which shared 41.7 percent to Other Services, contributed most of the growth of the sector with 12.4 percent expansion during the period. Other subsectors likewise posted growth but at a slower pace: Hotels and Restaurants, 6.6 percent; Health and Social Work, 4.7 percent; Recreational, Cultural and Sporting Activities, 2.5 percent; Other Service H - 7

Activities, 4.9 percent; and Sewage and Refuse Disposal Sanitation and Similar Activities, 1.6 percent.

Public Administration and Defense speeds up

Public Administration and Defense; Compulsory Social Security Schemes accelerated to 5.5 percent in the first quarter of 2017 as compared with the 5.2 percent recorded during the same period in 2016. The increase was attributed to the higher salaries of government employees under the second tranche of the salary adjustments under the Executive Order 201, S. 2016. Aside from the salary adjustment, creation and filling up of positions contributed in the acceleration of the sector. H - 8

EXPENDITURE SIDE

Household Final Consumption Expenditure (HFCE) slows down

The household expenditure grew by 5.7 percent in the first quarter of 2017. This was slower than the 7.1 percent growth in the same quarter of 2016.

Food and Non-alcoholic Beverages, sharing 39.7 percent of the total household expenditure, decelerated to 5.7 percent compared with the 6.4 percent growth recorded in the previous year. Miscellaneous Goods and Services, the next top contributor of HFCE, grew by 8.0 percent. This was slower than the 8.1 percent in 2016.

Aside from the abovementioned expenditure items, the other top contributors to the growth of HFCE were: Housing, Water, Electricity, Gas and Other Fuels, 6.6 percent, compared with the 10.5 percent growth posted in the previous year; Transport, 5.0 percent, slower than the previous year’s growth of 6.9 percent; and Restaurants and hotels, 8.0 percent, compared with 9.5 percent of 2016.

On the other hand, Recreation and culture pulled down the growth of HFCE with 2.0 percent contraction compared with 8.8 percent growth posted in 2016.

Government Final Consumption Expenditure (GFCE) eases

Government Final Consumption Expenditures (GFCE) grew by 0.2 percent in the first quarter of 2017. This was slower than the 11.8 percent posted during the same period in 2016. The deceleration was due to the decline in the maintenance and other operating expenditures (MOOE) of various government agencies. Delays in the implementation and procurement of various government programs contributed to the lower growth of GFCE. Moreover, the slowdown was also due to the higher expenses recorded during the election period in 2016. H - 9

Investments in Fixed Capital Formation slows down

Investments in Fixed capital formation slowed down by 11.8 percent growth in the first quarter of 2017. This was lower than the 28.3 percent increase in the same quarter of the previous year.

Private Construction drives Construction Investments

Investments in Construction increased by 9.9 percent in the first quarter of 2017, slower compared with 15.1 percent in the previous year. Private Construction, which accounted for 81.6 percent of total investments in Construction for the quarter, grew by 11.9 percent, faster compared with 10.5 percent in the same period in 2016. Meanwhile, Public Construction grew by 2.0 percent, slower compared with 38.5 percent in the same period of 2016.

Investments in Durable Equipment decelerates

Investments in capital formation for Durable Equipment expanded by 12.5 percent in the first quarter of 2017. This was lower compared with 37.4 percent registered during the same period in 2016. Increased investments were registered in 13 types of fixed asset investments.

Increased investments were attributed to the following commodities: Other miscellaneous durable equipment, 29.3 percent; Road vehicles, 8.7 percent; Other general industrial machineries, 32.6 percent; Water transport, 114.2 percent; and Aircon and refrigeration equipment, 22.3 percent.

On the other hand, six durable equipment registered declines namely: Other Special Industrial Machineries, 9.6 percent; Office Machines and Data Processing, 17.2 percent; Pumps and Compressors, 5.4 percent; Sugarmill Machineries, 89.4 percent; Air Transport, 16.9 percent; and, Pulp and Paper Machineries, 35.3 percent. H -10

Investments in Breeding Stocks and Orchard Development (BSOD) increases

Capital Formation for BSOD for the first quarter of 2017 increased by 3.1 percent. The growth, however, was slower than the 3.8 percent increase registered in the same period of the previous year.

Intellectual Property Products (IPP) slows down

Intellectual Property Products slowed down by 27.2 percent in the first quarter of 2017 from 50.4 percent in the same period of the previous year. The growth was attributed to the increased in investments on entertainment, literary or artistic originals.

Inventories posted withdrawals

Inventories recorded a total of Php 2.2 billion withdrawals in the first quarter of 2017, compared with the Php 17.5 billion additions accounted during the same period in 2016. The establishments brought these withdrawals during the quarter.

Exports of Goods continues to grow

The country’s total Exports of Goods recorded its highest growth since third quarter of 2010. It grew by 22.3 percent in the first quarter of 2017, higher than the 10.2 percent posted during the same period of the previous year.

The main drivers of the growth were: Component/Devices (Semiconductors) with 23.4 percent; Control Instrumentation, 496.3 percent; Articles of Apparel and Clothing Accessories, 97.6 percent; Electronic Data Processing, 28.7 percent; and Office Equipment, 171.4 percent.

Meanwhile, the following commodities pulled down the growth of the sector: Telecommunication, 40.0 percent; Consumer Electronics, 39.6 percent; Sugar, 77.9 percent; Automotive Electronics, 54.4 percent; and Pineapple and Pineapple Products, 37.0 percent. H -11

Exports of Services moderates

Exports of Services slowed down by 14.3 percent during the first quarter of 2017 as compared with 15.3 percent posted in the same period of the previous year. Miscellaneous services was the highest contributor to the growth with 20.2 percent. Other contributors to the growth were: Transportation, 22.4 percent; Government, 34.2 percent; and, Insurance, 44.1 percent.

On the other hand, Travel declined by 18.1 percent compared with 15.0 percent growth registered during the same period in 2016.

Imports of Goods sustains growth

Total Imports of Goods grew by 20.8 percent in the first quarter of 2017. This growth was lower than the 23.9 percent in the same period of the previous year.

The growth of the sector was due to the following commodities: Component/Devices (Semiconductors), 33.8 percent; Transport Equipment, 14.0 percent; Electronic Data Processing, 27.9 percent; Machinery and Mechanical Appliances, 23.6 percent; and Base Metals, 62.7 percent.

On the other hand, the following commodities pulled down the growth of total Imports of Goods: Telecommunication, 36.1 percent; Mineral Fuels, 8.7 percent; and Feedstuff, 2.6 percent.

Imports of Services decelerates

Imports of services decelerated to 4.4 percent during the first quarter of 2017 as compared with 11.4 percent growth in the same quarter of 2016. Travel contributed the most to the growth of this sector at 9.0 percent, higher than the 0.2 percent posted in the previous year. Moreover, Miscellaneous services grew by 2.1 percent, slower than the 13.6 percent growth in 2016. H -12

On the other hand, Insurance and Government slowed down by 14.4 percent and 3.4 percent, respectively while Transportation declined by 2.3 percent.

Trade Balance continuously records deficits

Total Exports valued at Php 1,237.1 billion at current prices was lower compared with the Total Imports valued at Php 1,607.2 billion at current prices during the first quarter of 2017. As a result, deficits of Php 370.1 billion was registered during the period.

Trade Index decreases

Trade index was recorded at 88.9 percent during the first quarter of 2017. This was lower than 90.6 percent posted during the same period in 2016.