RP economy grows 4.8% -- stronger than expected

RP economy grows 4.8% -- stronger than expected

MANILA (AP): The Philippine economy grew by a far stronger- than-expected 4.8 percent on year in the third quarter, but its outlook now hinges on whether a political crisis that has hammered investor confidence can be quickly resolved, officials said Tuesday.

Boosted by unexpectedly strong performances from industry and manufacturing, coupled with robust agricultural production, growth in the third quarter far exceeded market expectations of well under 4 percent. The gross domestic product expanded 4.5 percent on year in the second quarter.

"This is a good surprise," Philippine Central Bank Governor Rafael Buenaventura told Dow Jones Newswires, adding that the favorable economic numbers will benefit the peso and help bring down domestic interest rates.

While the events that led to the impeachment of President Joseph Estrada on corruption charges unfolded in mid-October, many economists feared that growth would slow in the third quarter on a raft of negative political and economic factors.

Socio-economic Planning Secretary Felipe Medalla said a 5.5 percent jump in agricultural production in the third quarter brought output back to levels before the severe El Nino drought in 1998. The farm sector accounts for around 20 percent of the country's economic output.

Meanwhile, manufacturing output - boosted by the weak peso spurring exports - rose 6.7 percent on year in the third quarter after expansions of 6.0 percent and 6.2 percent in the first and second quarters, respectively.

The third quarter also saw a contraction in construction activity narrow to 5.7 percent on year from 8.6 percent in the second quarter, and stronger growth in the utility sector.

Medalla said growth in the fourth quarter of 3.4 percent was attainable, which would put the government's target of at least 4 percent economic expansion this year within reach.

"If it were not for the recent events, I would be 99 percent sure we would get at least 4 percent" full-year growth, Medalla said, referring to Estrada's impeachment and fears that a prolonged crisis could badly damage the economy.

Medalla said if the impeachment process drags on well into next year, the fallout on the economy may be severe, with growth coming in as low as 2 percent in 2001. But a speedy resolution could allow the economy to grow around 3.5 percent, he said.

Either way, that would still make the Philippines the slowest growing economy in developing Asia next year, according to the latest forecasts from the Asian Development Bank.

Even in Indonesia, where separatist violence, pervasive corruption and massive corporate debt remain big obstacles to recovery, the ADB is forecasting growth of 5 percent in 2001.

With growth of only 3.3 percent forecast for next year by the ADB, the Philippines is at the bottom of the Asian growth league.