Arroyo: 7.5% GDP growth fastest in 2 decades

(Update) The economy grew 7.5 percent in the second quarter compared to a year ago, the fastest rate in two decades, President Gloria Macapagal Arroyo said Thursday. ''Our economic plan is working. Today we have the latest glowing indicators to show it,'' a beaming Mrs Arroyo told a nationally televised news conference on the better-than-expected data. She said gross national product, which includes income from abroad, rose 8.3 percent for the second quarter from a year ago First-quarter economic growth, excluding the overseas income, was revised upward to 7.1 percent from the original 6.9 percent, pushing first-half GDP to an average 7.3 percent from a year ago, she added. ''We're confident of meeting our full year growth forecast of 6.1 percent to 6.7 percent,'' Mrs Arroyo said. The Philippines has defied expectations by increasing revenues, cracking down on tax cheats, strengthening the peso, boosting the stock market, balancing the budget, prepaying its debts and creating more jobs, she said. The services sector remained the economy's linchpin, registering strong growth of 8.4 percent, while industry posted eight percent growth, said Estrella Domingo, assistant secretary general of the National Statistical Coordination Board. Mrs Arroyo said newfound money for investment has allowed the economy to increase its growth pace. ''While our economy has reached a new level of maturity and stability with one of the strongest macro-economic fundamentals in two decades, we should not rest, but push forward and sustain the momentum,'' she said. Mrs Arroyo said revenue and deficit targets must be achieved to maintain investor and creditor confidence and keep the flow of low-interest capital strong. Tax and customs agencies must hit their targets, she said, and business concerns over power costs and red tape must be addressed, while investments in small and medium industries, tourism and infrastructure must be intensified. University of the Philippines Economics Professor Cayetano Paderanga said in a news cable interview that the growth rate was ''surprising in the sense that it exceeded most expectations about what the growth would be in the second quarter.'' He said the data need closer scrutiny, citing the ''rather high'' agricultural growth being reported and the expansion in manufacturing that comes at a time when exports are down due to the strong peso. Short-term and artificial Also Thursday, militant think tank IBON Foundation scored the government's second-quarter figures of a 7.5-percent economic growth as “short-term and artificial." "The reality however is that unsustainable election-related spending especially by the government is a major factor, that the growth is creating the wrong kinds of jobs, and that the country's productive sectors continue to deteriorate," IBON said in a statement. It said the first semester up-tick in growth rates were most of all due to the appalling election-related spending by candidates and by the administration in support of its candidates. According to IBON, total campaign spending by candidates for all elected positions could have reached from P30 billion to over P50 billion. "But on top of this the government conspicuously increased its spending by P51.4 billion during the first semester 2007 election period compared to the first semester 2006 non-election period– bringing total election-related spending to a scandalous P101.4 billion," it said. IBON said the administration's election-related spending is clear from its expenditures in the first semester. The allotment to LGUs of P99.8 billion in the first semester of 2007 is a conspicuous P21.0 billion or 27% increase from the same period in 2006. This is in contrast to what was just a P1.0 billion or 1% increase between 2005 and 2006, it said. Also, other national government spending – i.e., through the modified disbursement scheme (MDS) and miscellaneous spending – of P308.5 billion in the first semester of 2007 is a striking P56.5 billion or 22% increase from the same period in 2006. In contrast, there was just a P25.1 billion or 11% increase between 2005 and 2006. "This spending is reflected in the striking increase in the growth rate in government consumption ( 13.5% in the second quarter of 2007) which is four times the rate in the same period last year (3.3%). It is also the highest growth rate among all expenditure items in 2007 and is even more than double than that of personal consumption expenditure ( 5.9%)," it said. Even the 10% growth in fixed capital formation was in large part driven by public construction, which grew a marked 39.6% from 11.8% a year ago, it said. This conspicuous government spending is also reflected in GDP accounts by industry with noticeably large growth rates in construction ( 21.0% in the second quarter) and transport (9.8%), it said. On the other hand, manufacturing sector growth slowed to 3.7% in the second quarter of 2007 from 4.2% last year, while agriculture sector growth also slowed to 3.9% from 6.7% last year. The slowdown is also reflected in how the manufacturing sector lost 105,000 jobs in April 2007 from the same period last year. "The growth is also creating the wrong sorts of jobs. Some 673,000 or over half of the net increase in jobs of one million in April 2007 from the year before is in unpaid family work (524,000) and in domestic household help (147,000). These are among the country's lowest-earning or are outright non-paying jobs," it said. - GMANews.TV with a report from AP