Economy has nowhere to go but up – Abad

MANILA, Philippines - The economic growth rate has nowhere to go but up given the economy’s traditional strong performance in the second half, Budget Secretary Florencio Abad said yesterday.

Asked how he thinks the economy performed in the third quarter, Abad told reporters Philippine economic expansion has been “good” so far and would “continue to improve” in the second semester.

Growth slowed to 5.3 percent in the second quarter from 6.4 percent in the same period a year ago. The government has set a seven- to eight-percent target for the year, but has long resigned to hitting even just an average of six percent.

Earlier, Abad said the interagency Development Budget Coordinating Committee, which sets the government’s macroeconomic assumptions, would no longer revisit targets within the year.

“There’s still a lot of growth to further heighten the domestic demand component of the economy. The capacity is huge,” Abad said during the Kapihan sa Manila Bay at the Luneta Hotel.

Traditional drivers of holiday spending, as well as accelerated government spending would work on the economy’s favor. The budget chief said this would help offset weak external factors which are “beyond our control.”

Among the weaker spots of growth in the second quarter came from exports, which grew by a slower 3.7 percent in the first half, data from the Philippine Statistics Authority showed.

Broken down, exports of goods even contracted by three percent during the period, although this was more than offset by service exports that rose 31 percent.

Meanwhile, government final consumption – a measure of the state’s contribution to the economy – grew by 3.9 percent during the same period from previous year’s zero growth. This, even as state disbursements slowed early in the year.

According to Treasury data, state disbursements rose nine percent during the first half to P1.072 trillion, although the figure was still below the program during the six month period.

By July, however, expenditures have shown some signs of further acceleration, growing 25 percent before improving by a further 15 percent in August. For the first eight months however, spending was still 15 percent below government program.

“We are positive that the numbers will show a better growth forecast in the next semester in terms of expenditures contribution to general growth,” Abad said.

“We are really addressing the institutional weaknesses and bottlenecks to ensure fast track disbursements,” he added.