Philippine central bank: economy is up

The Bangko Sentral ng Pilipinas (central bank) said the economy likely performed better in the second quarter of the year.

”Based on the testimony of the Department of Budget and Management at the budget hearing, there was a catch-up spending in the second quarter going through the second half of the year. That would possibly help in better growth in the second quarter,” BSP Deputy Governor Diwa Guinigundo told reporters.

He said external challenges such as the political tension in the Middle East and North Africa region, the natural calamity that hit Japan and debt problems in some parts of Europe had a negative impact on the country’s economic performance in the first quarter of the year.

That was the problem in the first quarter. Also I think because of the carryover of the adjustment pains of the Aquino administration, there was modest spending during the previous quarter,” Guinigundo said.

Philippine gross domestic product growth decelerated to 4.9 percent in the first quarter this year from 6.1 percent in the fourth quarter of 2010 because of the decline in government spending—a trade-off stemming from fiscal consolidation and a high year-ago pre-election spending.

The key measure of economic output, GDP is the total value of final goods and services produced in the country.

Besides improved state spending, the flow of foreign capital into the local stock and bond markets were supportive of growth, Guinigundo said.

Transaction in foreign portfolio investments, or hot money, yielded a net inflow of $2.7 billion in January to July this year, up by more than twofold from the $701 million recorded in the same period last year.

The BSP had attributed the surge in capital flows to the strong interest in peso government securities and fixed income investments buoyed by the overall positive sentiment for emerging markets like the Philippines.

Likewise, foreign direct investments recovered in May to register net inflows of $162 million, a turnaround from the $31-million net outflow in the same months last year.

The May inflows brought the cumulative net FDI inflows in the first five months of the year to $714 million, up by 15.3 percent from the $619-million level recorded in the same period in 2010.