PH economy still among Asia’s fastest amid easing inflation
The Philippine economy remained one of the best performers in Asia after rebounding from an initial slowdown in the first two quarters of 2019 amid obstacles, reflecting the government’s spending catch-up and easing inflation.
Socioeconomic Planning Secretary and National Economic and Development Authority (NEDA) Director General Ernesto Pernia said the goal of advancing to an upper middle-income status is “going to be surer next year”.
“We are going to be reclassified as an upper middle-income country by next year and the downside to that will be less access to concessional loans. So we really have to make sure that we finish our major infrastructure projects that are big-ticket projects in terms of cost by 2023,” he said.
Pernia said the government intends to focus on projects that can be completed by 2022, as well as “those that can be started substantially such that it will be more difficult for the next administration to reverse.”
He said there is a grace period of three years from the time the country achieves the status before changes in terms and conditions of lending agreement take effect.
In the World Bank’s classification, upper middle-income economies are those with a gross national income (GNI) per capita of USD3,996 to USD12,375. The Philippine GNI per capita reached USD3,830 in 2018.
The Philippine gross domestic product (GDP) accelerated by 6.2 percent in the third quarter, making it the second fastest-growing major economy after Vietnam, and ahead of China, India, Malaysia, Indonesia, and Thailand.
It recorded a 5.8-percent growth rate in the first three quarters of 2019, slightly below the lower-end of the government’s 6 to 6.5-percent full-year growth rate.
“The economy has continued to grow this year despite its initial slowdown in the first two quarters and the obstacles that were thrown its way -- from the El Niño phenomenon that resulted in water shortages, the delay in the passage of the 2019 budget, to the US-China trade war, among other things,” Pernia said.
Authorities attributed the weak performance in the first two quarters of 2019 to the effect of the delay in the passage of the 2019 national budget, which prevented the government to spend on its infrastructure program, among others.
President Rodrigo Duterte signed this year’s budget only in April.
Economic managers thus implemented a catch-up spending program, which resulted in growth recovery in July to September.
Pernia said the “catch-up plan” on spending on infrastructure projects has also some impact on increasing the country’s economic growth in October to December.
“In the fourth quarter, consumer spending really got boosted by bonuses, OFW (overseas Filipino workers) remittances also rose 7.7 percent in October, and that also contributed to increased consumer spending which accounts for about two-thirds of GDP,” he added.
NEDA Undersecretary Rosemarie Edillon also cited that private consumption would be robust given the slow inflation, especially food, as well as government consumption.
“Investment spending is also very hefty especially this fourth quarter, actually leading to the fourth quarter,” she said, adding that tourism receipts are likewise expected to post gains with the Philippines’ hosting of the Southeast Asian Games (SEA Games).
Pernia said prices, which are a major concern of ordinary Filipinos, have also remained stable this year.
He added year-to-date headline inflation for 2019 stood at 2.5 percent, which was mainly driven by lower food prices and price rollbacks for domestic petroleum products brought about by the decline in global oil prices.
The average inflation to date is still within the government’s 2 to 4-percent target band.
After it decelerated for five consecutive months since June 2019, inflation rate rose to 1.3 percent in November primarily due to faster rate of price increases of alcoholic beverages and tobacco index.
Rice deflation, however, was observed for the seventh consecutive month in November 2019.
Pernia expected the rice tariffication law (RTL) continuing to help bring down overall inflation as it helps improve rice stock inventory of the country.
“Today with the RTL, 101 million Filipinos are enjoying more affordable rice,” he said, adding the RTL includes the Rice Competitiveness Fund (RCEF) which aims to help affected farmers increase their yield, diversify crops, and reduce postharvest losses and production and marketing costs.
To be sourced from rice import tariff collections, the annual PHP10-billion RCEF will go to providing local palay growers with farm machinery and other equipment, high-yield seeds, cheap and easy credit, and skills training on farm mechanization and other modern technologies.
From 2020 to 2022, economic planners are targeting a 6.5 percent to 7.5-percent GDP growth.
“The main advantages there would be the budget would have been passed by then before the end of the year so there will be no reenactment of the budget for 2020. So that would already be a good start for the year and in the home stretch, government spending on infrastructure will increase further because we want to finish as many infrastructures as possible,” Pernia added.
To support and sustain inclusive growth through infrastructure, he said the NEDA Board has approved seven new projects amounting to PHP187.34 billion.
“Majority of these projects will be implemented outside Metro Manila, as we aim to develop growth centers in the regions and spread economic growth and development throughout the country,” he said.
Pernia also considered consumption spending an economic growth driver as inflation remains stable.
On the downside, the NEDA chief said the trade war between the United States and China is “still continuing although it has softened a bit and we hope it will soften further.”
“Looking at these milestones in our journey, we see a stable economic performance for 2019, even as we remain vigilant and prepared to face risks such as the possible water shortages in 2020, weak global growth and stagnating world trade, disruptive technologies, and the volatility of oil prices,” Pernia added.