RTTNews - Philippines' gross domestic product or GDP growth slowed significantly in the first quarter, weighed down by the impact of the U.S financial meltdown and the global economic crisis, along with record falls in manufacturing and trade.

Thursday, data released by the National Statistical Coordination Board showed that the GDP growth eased to just 0.4% annually in the first quarter from 3.9% in the year-ago period.

On the expenditure side, household and government consumption expenditures were the main drivers of growth. Consumer spending rose 0.8%, much slower than a 5.1% rise in the previous year, as continued price rise caused consumers to spend less. However, government spending showed a better performance, rising 3.8%, reversing the 0.3% fall in the preceding year.

However, investments in fixed capital formation dropped 5.7%, after a 3% growth in the previous year, owing to a significant fall of 17.9% in the investments in durable equipment.

Net trade also showed dismal performance. Exports dropped by 18.2%, following a 7.7% fall last year, while imports dipped 19.2%, after a 2.6% decline in the same period the preceding year. The trade deficit stood at PHP2.3 million.

On the production side, positive contributions came from construction, agriculture, mining and quarrying, transport, communication and storage and private services.

The Gross National Product grew 4.4% in the first quarter, owing to a marked rise in the Overseas Filipino Worker remittances. This in turn pushed up the net factor income from abroad to 40.8% from 36.2% last year.

A major challenge for policy makers right now would be to prevent the economy from falling into recession, as the seasonally adjusted GDP dropped 2.3% sequentially in the first quarter, the lowest in 20 years. Similarly, the GNP slipped 1.2%, the first fall since the first quarter of 2001, when both GDP and GNP contracted quarter-on-quarter. Moreover, the leading economic indicator for the second quarter moved into negative territory, confirming the threat of a recession.

The Philippine central bank said it would continue to ease the interest rate until there were signs of improvement in the economy. In April, the central bank cut its key interest rates to a 17-year low of 4.5%, as the worst global recession since the Second World War reduced demand for the country's exports. The Monetary Board is due to meet again today.

Meanwhile, the country's Socioeconomic Planning Secretary Ralph Recto said earlier last week that the government was confident of achieving its full-year growth target of 3.1%-4.1%, as higher remittances from overseas Filipino workers would pave the way for the economy to expand in line with expectations.

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