Philippine economy grows at slower 4.3% pace

MANILA, Philippines — The Philippine economy experienced a deceleration in growth during the second quarter, attributed to dampened consumption resulting from elevated prices and interest rates, as well as a contraction in government expenditure.

In a press briefing yesterday, Philippine Statistics Authority (PSA) chief Dennis Mapa said the gross domestic product (GDP) expanded by 4.3 percent in the second quarter, slower than the previous quarter’s 6.4 percent growth and the 7.5 percent expansion in the second quarter of last year.

This is the slowest growth posted since the 3.8 percent contraction in the first quarter of 2021.

Excluding the pandemic years when the country registered five consecutive quarters of GDP contraction, the last time the economy posted growth below four percent was in 2011.

The second quarter GDP growth brought the average growth in the first semester to 5.3 percent.

National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan said the growth in the second quarter was supported by increases in tourism-related spending and investments, “but was tempered by high commodity prices, the lagged effects of interest rate hikes, the contraction in government spending, and slower global economic growth.”

While inflation, or the rate of increase in prices of goods and services, has slowed down in recent months, he said prices are still elevated.

Inflation eased for the sixth straight month in July to 4.7 percent due to slower increases in food and utility costs. This brought the average for the January to July period to 6.8 percent, still higher than the Bangko Sentral ng Pilipinas’ two to four percent target range for this year.

Data showed household final consumption expenditure grew by 5.5 percent in the second quarter, slower than the 8.5 percent expansion in the same period last year.

Government spending, meanwhile, contracted by 7.1 percent in the second quarter from a 10.9 percent growth in the same period in 2022.

Balisacan said this was partly due to the lack of election-related spending.

All major economic sectors posted positive growth in the second quarter, with agriculture, forestry and fishing expanding by 0.2 percent; industry rising by 2.1 percent and services increasing by six percent.

While the country posted slower growth in the second quarter, the government remains optimistic of hitting the growth target for the year.

“To achieve the target growth rate of six to seven percent for the year, the country’s GDP needs to grow by at least 6.6 percent in the second half of 2023. Notwithstanding the challenges, we believe this is still attainable,” Balisacan said.

To meet the growth target, he said there is a need to accelerate the implementation of government programs and projects.

He said agencies are being encouraged to come up with catch-up plans, as well as to accelerate and even frontload the implementation of programs and projects.

“Moreover, fiscal stimulus activities are underway to increase the productive capacities of both the public and private sectors,” he said.

On the part of NEDA, he said the agency has put in place a monitoring system to track the progress of major infrastructure projects on a quarterly basis.

“We are also putting in place a more active monitoring of our ODA (official development assistance)… NEDA will be calling the attention of agencies on the delays of ODA projects. So we are putting in place measures to ensure projects and programs are not necessarily delayed,” he said.

While inflation has been decelerating in recent months, he said the government will continue to intensify interventions for price stability amid upside risks such as weather disturbances including El Niño, trade tensions, and the imposition of export bans in other countries.

To address the adverse impact of the recent typhoons and monsoon rains, he said the immediate use of the Quick Response Fund and other disaster-related budgetary instruments of the government is being pushed.

With external factors posing risks to the country’s growth, hesaid the government would monitor closely the impact of the global economic slowdown and the recent wave of trade protectionism on the country’s exports.

“We will facilitate the diversification of external markets to expand opportunities for our exporters,” he said.

He said  the government would conduct more discussions j with sectors adversely affected by the global economic slowdown and shifts in demand preferences.

In addition, he said the government is continuing the implementation of programs aimed at providing loans for marginalized farmers and fisherfolk and micro and small enterprises at low-interest rates, with minimal or no collateral, and fewer documentary requirements.

“The economic team is closely monitoring domestic and external developments and is ready to make policy adjustments to ensure that we attain our medium-term growth targets,” he said.

For his part, Rizal Commercial Banking Corp. chief economist Michael Ricafort said GDP growth could normalize at the five percent to six percent levels in the remaining quarters of the year.

He said it is possible to see 5.5 percent to six percent GDP growth for full-year 2023 and beyond “amid the country’s favorable demographics or demographic sweet spot or demographic dividend or majority of the population of more than 110 million already at working age since 2015, with the stabilization or increase in the GDP base or denominator that could quantitatively lead to slower but more normalized year-on-year growth.”