The Philippine economy expanded 2.2 per cent in the first quarter, its fastest pace in five years, helped by the biggest gains in construction since the fourth quarter of 2000.

Gross domestic product accelerated from a revised 1.5 per cent in the fourth quarter of last year, adjusted for seasonal factors, Economic Planning Secretary Romulo Neri said in Manila. The median estimate of three economists surveyed by Bloomberg News was for the US$79 billion economy to grow 0.9 per cent.

Rising sales at companies including developer Ayala Land Inc may help the economy reach the upper end of President Gloria Arroyo's 2004 growth target. That may aid job creation and increase tax revenue, which could narrow the budget deficit, cut debt and reduce the third of spending that goes for interest payments instead of roads, schools and other state services.

"This early start provides the leverage" for achieving the full-year target, said Myton Narciso, economist at the Manila-based Multinational Investment Bancorporation. "It will create opportunities for small businesses to create employment. The increased spending translates into a bigger tax base."

Unemployment, the highest among 11 Asia-Pacific nations tracked by Bloomberg, rose to 11 per cent in January. Arroyo plans to reduce the deficit to 198 billion pesos (US$3.54 billion) this year from 200 billion pesos (US$3.57 billion), or 4.6 per cent of gross domestic product, last year and balance the budget by 2009. The government has been posting deficits since 1998.

Industry grew 2.6 per cent, its fastest rate since the first quarter of 2000, spurred by construction and manufacturing, Neri said.

Construction gained 6.5 per cent from the year before, led by private construction, its biggest gain since the fourth quarter of 2000. Manufacturing expanded 4.3 per cent, the fastest rate in three quarters. The government does not provide quarter-on-quarter breakdowns for those sectors.

Private construction may have been increased by falling interest rates. The central bank cut key rates 8.75 percentage points from December 2000 to June last year. Bank lending started growing in September 2002. Permits for private construction rose for the third straight quarter in the fourth quarter, Assistant Economic Planning Secretary Gay Cororaton said in a phone interview.

Agriculture, which makes up a fifth of the economy, grew 2.8 per cent in the first quarter, the third straight quarter it expanded more than 2 per cent.

(China Daily 05/28/2004 page11)