Purisima: Philippine economy buoyed with more confidence and optimism than ever
The economy grew by 6.9% in the first quarter of 2016, the fastest among the ASEAN-5, and outpacing China for the first time in 27 years. Despite dampened global growth, the Philippines posted its highest quarterly growth rate today in almost 3 years (since Q2 2013), marking 69 straight quarters of growth and 17 consecutive quarters of above 5% GDP growth.
Driving growth for the quarter is capital formation at 23.7% (highest in 10 quarters), particularly fixed capital formation, at 25.5% (highest in 23 quarters), equivalent to 5.8 percentage points of real GDP growth, in what is certainly a sign of ever increasing investor confidence in our trajectory as people continue to bet on the Philippines for the long haul.
Consumer confidence maintains its robust character, with this quarter’s consumer optimism matching the all-time high recorded in Q2 2013. This is reflected in the 7.0% jump in household consumption, buoyed by low and stable prices and record unemployment at 5.8% in the January Labor Force Survey, the lowest in a decade. Enjoying the benefits of a better credit standing, commercial vehicle sales leapt 23.4% this quarter, owing in large part to attractive financing options and lower costs of borrowing.
Government consumption meanwhile, accelerated 9.9% as the public sector continues to use our vastly expanded fiscal space to invest in our people. Public construction accelerated by 39.9% this quarter, as the government completes road network projects and capital outlays in health and education.
Tourist arrival figures expanded 15.1% compared to the 6.3% posted year-ago, pushing travel growth to 7.8% compared to the 0.2% contraction same period last year. Miscellaneous services exports grew 12% due to the sustained strength of the IT-BPO industry, which now employs 1.3 million Filipinos and takes an 8% slice of the GDP, fueling a virtuous cycle of consumer confidence and domestic demand.
Macroeconomic fundamentals remain sound with our current account surplus estimated at $8.9 billion or at least 3% of GDP. Our fiscal position is shaped for resiliency and sustainability, with a record debt-to-GDP ratio of 44.8% in 2015 and a foreign debt share of only 15.6% to GDP. Lengthened maturities (currently at 10 years), a heavy domestic financing bias (at 58% in 2015), less bunching up (only 11.1% of the total debt stock redeemed within the next 12 months), and lower interest rates (5.1% WAIR as of end-March 2016) make our debt structure built to withstand global turbulence.
The next administration and indeed, the next generation, inherits a rapidly growing, vibrant Philippines cushioned by robust foundations built over 6 years. The running 6-year growth average of 6.2% is our fastest streak since 1978, which when compared to the 3.8% average from 1995-2010 reflects how much we have improved our structural growth capacity. Over the past 6 years we committed to addressing our growth constraints, vastly ramping up education spending by 125%, social services by 166%, health by 336%, and infrastructure by 360%. This is an unprecedented amount of investment making up for lost time and fulfilling our aspirational growth requirements.
We are leaving the Philippines in a much better place than when we first found it. The long night of vicious cycles is over: echoing President Ronald Reagan, I think it’s morning again in the Philippines. President Aquino’s leadership driving good governance has created a virtuous cycle of great economics, setting us on a sustainable path to prosperity.
President Aquino’s legacy will best be remembered, I think, for empowering Filipinos to believe that we can do and be better. No longer the sick man of Asia, the Philippines emerges more confident and more optimistic than ever, demanding to be governed by even higher standards of governance than before.
Brighter days are ahead for Asia’s bright spot.