The Philippine economy continues to expand at a healthy pace despite a challenging external environment. With a second quarter Gross Domestic Product (GDP) growth of 3.4 percent and a revised first quarter GDP growth of 4.6 percent, the first semester GDP growth for 2011 stands at 4% percent. The rate actually doubles the pace achieved by most developed countries (most averaged 2% or less) in the same period, with most developed economies continuing to struggle with festering internal as well as external economic issues.
Growth has been led by household and government spending on the demand side, and by a strong turnaround of the agriculture sector as well as the modest expansion of the services sector on the supply side. Private construction grew at a robust 20.5% in the first half of the year.
Current economic expansion is sustainable with growth in 2011 and 2012 expected to remain above the average of the last 10 years. The government forecasts growth rates between 5.0% and 6.0% for 2011 and between 5.5% and 6.5% for 2012.
Economic growth in the Philippines is becoming more inclusive with unemployment rate at a low 7.2% as of April and GDP Per Capita trending up towards the upper middle income threshold.
The Philippines has managed to stabilize its macroeconomic fundamentals and is on good fiscal footing. Meanwhile, monetary policy continues to be flexible and aimed at supporting growth while targeting Inflation of between 3% and 5%. The banking sector continues to remain unruffled by external uncertainties with a record low of 2.7% in Non-Performing Loans (NPLs) and domestic enterprises enjoying single-digit lending rates.
The country's international economic stature has further improved with the string of upgrades in its credit rating (BB-Stable for S&P, BB+/Stable under Fitch, Ba2/Stable per Moody's), improved competitiveness position, as well as its reduced ranking in global corruption indices.
The country's economic managers will focus on programming and increasing public spending in the second half of 2011 and for 2012, after initially devoting themselves to establishing house-cleaning measures to ensure discipline in the procurement and project management process.
Further enhancements to the country's investment proposition will be worked on. Among the goals is the formulation of a shorter negative list, and inclusivity-themed programs in the agriculture, tourism, mining and retail sectors. Apart from infrastructure development, the government intends to allocate more resources to social and human capital expenditures (education, health, shelter).
The 2012 budget would likely be signed into law by 15 December this year, the first time the national budget is enacted on time in over a decade.