The economy grew 5.5 percent in the second quarter, the slowest in four years, as the El Niño dry spell, delayed approval of the government budget and ban on construction activities during the midterm elections tempered household demand and government spending.
Data from the Philippine Statistics Authority showed that the second-quarter gross domestic product growth was the lowest outturn in 17 quarters. The GDP grew 5.6 percent in the first quarter this year and 6.2 percent in the second quarter of 2018.
Economic growth in the first half averaged 5.6 percent, below the low end of the government’s target range of 6 percent to 7 percent set for the entire year.
“This means that we will have to grow by an average of at least 6.4 percent in the second half to reach the low-end of the full-year growth target of 6 to 7 percent in 2019,” Economic Planning Secretary Ernesto Pernia said in a news briefing.
“As we have anticipated, these have been challenging times. The past year, we had enumerated the major ones that we thought would impact our economic performance, namely the El Niño phenomenon, the increasing protectionism in advanced economies and the election ban on construction activities,” Pernia said.
Pernia said he remained optimistic for the economy going forward and the government was not “disappointed” by the second-quarter results. “We are just challenged,” he said.
Pernia expressed optimism that the Bangko Sentral ng Pilipinas under the helm of Governor Benjamin Diokno would do something to prop up the economy. The BSP’s Monetary Board cut the benchmark borrowing rate by 25 basis points to 4.25 percent in its meeting Thursday amid the decelerating inflation rate and slower economic growth.
“I’m sure the BSP will do something…. Diokno knows it by now. He is a pro-growth central bank governor…I’m quite optimistic he will do the right thing,” Pernia said.
ING Bank Manila senior economist Nicholas Mapa said household spending, which accounted for the lion’s share of economic growth, failed to offset contracting capital formation with growth slipping below the first quarter even as inflation remained in a downtrend.
He said elevated borrowing costs continued to divert disposable income from consumption to higher interest expenses.
The PSA said the main growth drivers in the second quarter were the trade and repair of motor vehicles, motorcycles, personal and household goods; manufacturing; and other services. Among the major economic sectors, services had the fastest growth with 7.1 percent, while industry expanded by 3.7 percent.
Meanwhile, agriculture, hunting, forestry and fishing had a minimal growth of 0.6 percent.
Data showed that with the country’s projected population reaching 107.9 million in the second quarter, per capita GDP grew by only 3.8 percent.
Pernia blamed the El Niño dry spell for the contraction of the agriculture sector. He said palay production fell 5.5 percent, while corn output declined 8.4 percent.
“We must introduce technological solutions to build resiliency of the sector and ensure the proper implementation of the rice tariffication law,” he said.
Pernia said the growing protectionist stance in advance economies had impacted the IT and BPO sectors, resulting in exports of miscellaneous services growth of merely 1.3 percent, down from double-digit expansion three years ago.
“The weak economic performance in the second quarter is a continuing impact of the election ban and delay in the approval of the 2019 national budget. Public construction dropped by 27.2 percent in the second quarter and offset the growth of private construction,” Pernia said.
Pernia asked Congress for the timely passage of the 2020 national budget “so as not to derail next year’s economic growth.”
He said with the current supermajority in both houses of Congress allied with the administration, lawmakers would do a better job of expediting the approval of the 2020 national budget.
Pernia said the second-quarter GDP outturn might prompt the interagency Development Budget Coordinating Council to modify some assumptions it agreed upon earlier.
The government operated on a reenacted budget in the full first quarter. It was only in April that President Rodrigo Duterte signed the P3.7-trillion national budget for 2019 after a couple of months of impasse between the two houses of Congress.
Finance Secretary Carlos Dominguez III earlier said the government should increase spending in the months ahead to achieve economic growth of more than 6 percent.
