The government admits it will be a challenge for the Philippines to reach the 6.5 percent to 7.5 percent economic growth target for full-year 2014 after a third-quarter slowdown brought the pace of activity to 5.3 percent.
The National Economic and Development Authority (NEDA) said the easing of growth in the previous quarter is likely to have dragged the expansion in gross domestic product (GDP) for the whole nine months to September to 5.8 percent. That compares with 7.5 percent achieved in the first three quarters of 2013, according to data from the Philippine Statistical Authority (PSA).
“Admittedly, even hitting the low end of the target growth rate for the year would pose a big challenge. We need to grow by at least 8.2 percent in the fourth quarter and we in the DBCC [Development Budget Coordinating Committee] will brainstorm intensively on how we can come as close to this figure as possible,” NEDA Director General and Socioeconomic Planning Secretary Arsenio Balisacan told reporters on Thursday.
Balisacan said the third-quarter economic performance shows a mixed picture of the private sector treading a more stable upward trajectory, government adjusting to new spending protocols, and the lingering negative impact of typhoon Yolanda and other calamities.
The socioeconomic planning secretary stressed that government agencies will have to be adequately prepared and enabled to comply with new protocols.
And more importantly, there is a need to improve the country’s resilience against disasters—through better preparedness, through adaptation, through adequate social protection and through having a faster response mechanism, he said.
Despite the slowdown, Balisacan said the Philippines remains one of the four fastest growing economies in the Asian region, next to China Vietnam and Malaysia.
“Going forward, do we see a brighter prospect? The short answer is ‘yes.’ We expect the private sector to maintain a robust performance; government will have adjusted to the new protocols and we see this in the most recent, though preliminary data coming from the DBM [Department of Budget and Management],” he added.
Tackling the bottlenecks
In a separate statement, the Department of Finance also acknowledged that the weaker third-quarter performance provides challenges, though he quickly added that the government is doing its best to tackle the bottlenecks to growth.
“Our 5.3 percent growth highlights some challenges which we have the ability to address. Government spending can improve, and we have ample fiscal space to increase investment in our infrastructure and our people, through education, health, and social services,” said Finance Scretary Cesar Purisima.
Purisima said the Aquino Aministration is confident that growth will pick up further as it strengthens its economic and good governance reforms.
Assurances of soundness
The “ingredients for sustained growth remain abundant as the fundamentals of our economy remain sound. The current account is at a hefty surplus of 2.9 percent of GDP in the first half of the year, and the fiscal deficit is well below our ceiling, ensuring we have the necessary fiscal space to spend productively,” he said.
“We expect a more solid foundation for growth as Congress approves our priority proposals on fiscal incentives rationalization and transparency, and amendments on the Build Operate Transfer Law and Foreign Investments Negative List,” he said.
Citing the country’s a strong external position and macroeconomic fundamentals, Purisima said the Philippines will continue on its positive growth trajectory.
“We push on in our conviction that our reform agenda has been and will always be a force for inclusive and sustainable growth for an increasingly competitive Philippines,” he added.
Govt spending to improve
For its part, the Department of Budget and Management said it will make improvements in government spending for the fourth quarter after public expenditures contracted by 2.6 percent in the third quarter.
“The decrease was largely caused by the low utilization of notice of cash allotments (NCAs) by government departments and agencies, which, in turn, affected the implementation of public infrastructure projects,” Budget and Management Secretary Florencio Abad explained.
Abad also mentioned that the uncertainties in the wake of the Supreme Court’s decision on the Disbursement Acceleration Program (DAP) may have played a role in this development, “as the ruling may have sent a chilling effect across the bureaucracy’s expenditure practices.”
“At the same time, some budget reforms we’ve put in place—exactly those designed to make the budget more transparent, accountable, and open—increased the requirements that agencies and departments had to comply with before their funds could be released,” he added.
Abad also noted the stimulus from the massive Yolanda rehabilitation and reconstruction projects failed to materialize because of delays in the formulation of the national government’s rehabilitation plan.
“At this point, we must sustain the reforms we’ve so far established to enhance transparency, accountability, and openness in the National Budget. As such, we intend to shape up expenditures before the year ends, especially as the DBM remains committed to meeting our full-year performance targets,” he said.