Philippine Business Magazine: Volume 9 No. 3 - News & Updates
First Quarter Economic Growth
From All Fronts

All the producing sectors outdid its year-ago record to push overall economic growth to 3.8% in the first quarter of this year. This year’s achievement was higher than the 2.9% increased posted in the first quarter last year. With a 22.5% increase in net incomes from abroad, Gross National Product growth rose to 4.9% from 3.4% in the same period last year.

The services sector led first quarter growth at 4.8% from 4.6%. Within the services sector, the highest growth was exhibited by the combined transport, communication, and storgae subsector (9.7%), and wholesale and retail trade (5.3%). The services sector accounted for 53.8% of GDP.

Agriculture, fishery, and forestry production expanded by 4.4% from 3.0%. Palay production, especially, turned around to an 8.8% growth from a contraction of 1.5%. Conversely corn production decelerated to a 2.9% growth from a growth of 6.8%. Overall, agriculture, fishery and forestry contributed 15.0% to GDP.

Industrial performance improved with a 1.9% growth from 0.6%. The extraction of crude oil from Malampaya carried mining and quarrying subsector to a 35.8% growth from a 13.8% slump. Manufacturing growth, meanwhile, decelerated to 2.0% from 3.2%. However, within manufacturing, food manufacturing and electrical machinery growth, recorded higher growths this year. The construction subsector recovered with increasing number of building permits after four past quarters of contraction.

First Quarter Office Take-up Down by Half Office space take-up for all grades in the Makati and Ortigas commercial business districts has slowed further in the first quarter of this year. Take-up level in the two major CBDs combined declined by 50% in the quarter, reported FPDSavills, one of the country’s leading property management firms. This was primarily attributed to the sharp decline in take-up in the Makati CBD, decreasing to 16,328 sq.m. in the first quarter this year from 39,412 sq.m. last year. For the Ortigas CBD, the first quarter figure was 11,739 sq.m., a 33% decrease from year-ago level. Rental levels in Makati are seen to average around P400 per sq.m. in 2002 while the estimated average rate in Ortigas is P250 per sq.m.. Office space prices in Makati are also expected to average P50,000 per sq.m. this year while Ortigas offices will command a lower P38,000 per sq.m. Given the current office space supply and demand situation in the market, FPDSavills estimates that it may take a minimum of 36 months for market equilibrium and recovery to be reached.

Production Slows Down Oil Is Not Well Petron and Shell, two of the country’s biggest oil refiners, have cut down production due to the weak domestic market. End-2001 industry figures show that local oil consumption grew by only 1% from the previous year. Petron is now only running at 70% of maximum capacity, with its Bataan refinery producing 126,000 barrels per day. Likewise, Shell is running its Batangas refinery at only 52% of maximum capacity to produce 165,000 barrels per day. The slowdown in Shell’s production is due in part to its importation of gasoline and liquefied petroleum gas, an option that is more cost-efficient for the company. In addition to the weak economy, the demand for oil products will slow down further with the full commercial operation of the Malampaya natural gas project in Palawan. The Philippine Institute of Petroleum has stated in March that the Malampaya gas field is estimated to reduce local oil demand by 20%.