Manufacturing propels GDP growth in 2010

THE flourishing industry sector has propelled growth of the country's 2010 gross domestic product (GDP), which expanded to 7.3 percent from a low 1.1 percent in 2009.

It was the highest annual growth registered in more than two decades.

Socioeconomic Planning Secretary Cayetano Paderanga said Monday the industry contributed 3.9 percentage points to total GDP growth, fuelled by brisk manufacturing particularly on electrical machinery, petroleum and coal products, and food.

"This is consistent with the strong pick-up in domestic demand and the rebound in external trade," he said.

The growth of the services sector, on the other hand, has remained firm, contributing 3.5 percentage points to the GDP growth, boosted by the strong performance of trade and private services.

"This was complemented by flourishing domestic investment, strong growth of business process outsourcing, hotels and restaurants, wholesale and retail trade, and import and export trade," he said in a report on 2010 National Income Accounts released during a press briefing Monday.

He said the 7.3 GDP growth is within the National Economic and Development Authority (Neda) forecast of 7 to 7.4 percent and well above the official growth target of five to six percent.

The agriculture sector did not perform well last year, contributing a negative 0.1 percentage point to GDP. Paderanga attributed the slow performance of agriculture to the lingering effects of the El Nino weather phenomenon in the first half of 2010.

"Full year agriculture, fishery and forestry (AFF) production last year remained subdued due to El Nino," he said.

But Paderanga expressed satisfaction with the country's 2010 economic performance, saying the figure "bolster confidence that the economy is on a path of strong recovery."

From a strong start of 7.8 percent in the first quarter, Paderanga reported that GDP growth continued to be above trend during the next three quarters of 2010 -- 8.2 percent in the second quarter, 6.3 percent in the third quarter and 7.1 percent in the fourth quarter.

"From a low base in 2009, significant economic developments both from the supply and demand sides characterized output expansion in 2010. For instance, economic activities were geared towards higher value-added activities as industry outpaced the services and agriculture sectors," he said.

Domestic demand, he said, continued to be an important growth engine for the Philippine economy in 2010. "But while personal consumption expenditures remained as the primary growth driver, we also saw investments providing a strong support to growth," he said.

Paderanga said private sector investment in construction and in machinery and equipment resulted in a robust 17 percent growth in gross domestic capital formation, providing support to the "healthy pace of growth in manufacturing and services."

"Private businesses responded well to brisk lending activities by banks offering low interest rates and to the relatively low inflation environment. While private consumption remained stable in the first three quarters, there was a significant push in the fourth quarter largely due to strong spending on food, household furnishings, and clothing," he said.