The Philippine economy grew slower thanexpected at 3.7 percent in 2011, held back by weak publicspending and external demand. In the fourth quarter (Q4),growth slightly improved at 3.7 percent. As in pastquarters, growth was driven by remittance-fueled householdconsumption, which grew by 6.7 percent. Thegovernment's disbursement acceleration plan waspartially successful and contributed 1.3 percentage points(ppt) to gross domestic product, or GDP growth in Q4, upfrom 0.3 ppt in Q3, but this was not enough to push growthup to the targeted level of around five percent. On theproduction side, the services sector, including thefast-growing business process outsourcing (BPO) industry,continued to drive growth. Industry, in particular exportsmanufacturing, was buffeted by weaker demand, whileagriculture suffered from typhoon damages, highlighting theneed to improve disaster and risk management. The country isbenefiting from strong macroeconomic fundamentals, politicalstability, and a popular government that is seen by many ascommitted to improving governance and reducing poverty.Several reforms have successfully started, notably in publicfinancial management. However, the window of opportunity isnarrowing given elections in 2013 and 2016 and thehistorical difficulty of moving forward with reforms whenthe campaign period kicks in. Now is the time to implementthe reforms needs to accelerate growth, create jobs, andreduce poverty.
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