<p>Real GDP growth of the Philippines rose to 5.4 percent in 2006 year after falling to 5 percent in 2005. This outcome surpassed the initial forecasts of many prominent analysts. What underpinned the higher growth rate were the rebound in the agriculture sec- tor, the solid manufacturing growth, the steady performance of the ser- vices sector, and the favorable fiscal conditions. Additionally, the economy was able to withstand the adverse effects of three strong typhoons in the last quarter of 2006 and the higher-than-expected fuel prices—both of which were partially offset by the more benign political conditions in 2006. The crucial issue, however, is whether these gains can be consolidated to push the economy into a high-growth path in 2007.</p>