Philippine economy plays catch-up
After a blip in the first few months of 2019, the Philippine economy is steering itself back on a stronger growth track.
Economic managers of the Duterte administration and even analysts from the private sector are one in saying the economy is bound to recover in the second half from the sluggish 5.6-percent expansion in the first six months.
They see the delay in the approval of the national budget for 2019—which primarily caused growth to dip to a four-year low of 5.5 percent in the second quarter—as a “one-off” that could be offset by the government’s efforts to accelerate fiscal spending in the remaining months of the year, particularly on infrastructure projects under the unprecedented and ambitious “Build, Build, Build” program.
Economic Planning Secretary Ernesto Pernia said in an forum organized by the Economic Journalists Association of the Philippines Aug. 27 that the previous growth target of 6 percent to 7 percent remained doable.
“We are hoping to achieve the low end of the target range, which is 6 percent. Meaning, we must average by 6.4 percent in the second half to achieve this,” Pernia told business reporters, editors and columnists.
Despite the promising outlook, Pernia said it would require a redoubling of efforts of the government, especially on public spending in infrastructure projects on a “24/7 work mode.”
The Philippine Statistics Authority said economic growth in the second quarter further slowed to a four-year low of 5.5 percent from 5.6 percent a quarter ago and 6.2 percent a year ago, weighed down by the El Niño dry spell, rising protectionism in advanced economies, delay in the approval of the national budget for 2019, and the ban on construction activities in the run-up to the midterm elections last May.
The sluggish and slower-than-expected expansion for the April-to-June period was the slowest since the 5.1-percent GDP expansion in the first quarter of 2015. It was also the second successive quarter that economic growth stood below 6 percent.
The performance brought the first-half GDP average to just 5.6 percent, below the low end of the target range of 6 percent to 7 percent earlier set by the government for the entire year.
President Rodrigo Duterte affixed his signature to the P3.7-trillion budget for 2019 in April after months of impasse between the two houses of Congress. As a result, the government operated on a reenacted budget that slowed economic growth in the process.
Strong household spending
Data provided by Finance Undersecretary Gil Beltran, the DoF’s chief economist, showed that household consumption remained robust, equaling last year’s first-half growth at 5.8 percent as consumer prices have trended down following quick response by the President on the streamlining of food supplies.
All other expenditure components declined—government consumption, from 12.6 percent to 7.1 percent; capital formation, from 14.9 percent to -0.1 percent, and exports, from 12.6 percent to 5.0 percent—as trade tensions rattled international value chains and dampened global investment.
But what is notable is that “private construction and services also maintained robust growth, providing hints of a quick recovery moving forward,” Beltran said.
He said the pickup in private construction from 6.5 percent to 23.1 percent cushioned the decline in public construction. Private construction contributed 1.1 percentage point to the 5.5-percent growth in the first semester, tempering the negative contribution of public construction of minus 0.7 percentage point.
“Had the growth in public construction been at most zero, GDP growth could have reached 6 percent,” Beltran said.
Services rose from 6.7 percent last year to 7 percent, with the financial sector paving the way, from 7.7 percent to 9.7 percent.
But agriculture continued to be the laggard, almost not moving from its 0.7 percent semestral growth.