The Philippine economy grew by a better-than-expected 6.9 percent in the third quarter, the government reported on Thursday, accelerating from the second quarter’s upwardly-revised 6.7 percent on the back of sustained export growth and improved public spending.
The July-September result, while lower than the 7.1 percent recorded a year earlier, surpassed the 6.3-6.6 percent forecast range in a Manila Times poll of analysts.
Year-to-date growth improved to 6.7 percent, within the government’s 6.5-7.5 percent target for 2017, but was again lower compared to the previous year’s 7.1 percent.
One of the best
The third quarter expansion means the Philippines remains one of the best-performing economies in Asia, Socioeconomic Planning Secretary Ernesto Pernia said.
“We are likely to rank second in Asia this quarter, next to Vietnam’s 7.5 percent and ahead of China’s 6.8 percent and Indonesia’s 5.1 percent,” he said in a press briefing on Thursday.
The government attributed the country’s performance to sustained growth in exports and improvements in public spending, which in turn boosted manufacturing and services.
On the demand side, a sustained recovery in public spending was said to have played a key role, with public consumption up 8.3 percent on account of increases in the base pay of civilian government employees and allowances for military and uniformed personnel, plus the filling-up and creation of positions at the Education department.
“This is in line with the government’s commitment to dependable and timely delivery of public services,” Pernia said.
Private consumer spending, on the other hand, eased to 4.5 percent in the third quarter.
On the supply side, Pernia said the services sector remained the main contributor to overall growth, expanding by 7.1 percent in the third quarter.
Industry growth was steady at 7.5 percent while agricultural production eased to 2.5 percent.
On track to hit target
With year-to-date growth at 6.7 percent, Pernia said the government was optimistic of meeting the 6.5-7.5 percent target for 2017.
He said the government sees a sustained improvement in spending as the “Build Build Build” program continues to unfold.
“This is expected to ramp up public spending even further. We see construction activities and public spending making a headway in line with the government’s aim to spend 5.3 percent of GDP this year for infrastructure and up to 7.4 percent by 2022,” he said.
While consumer spending may have slowed, Pernia said a pick-up in household consumption was expected in the last quarter due to the holiday season.
With private construction exhibiting a downtrend for two consecutive quarters, he said the government’s infrastructure program would open more opportunities for the private sector to expand business activities and increase capital spending.
The end of the war in Marawi City is also welcome development as reconstruction efforts will help residents get back on their feet and provide a boost to the local economy and Mindanao in general, Pernia added.
While the agriculture sector will likely continue to post positive growth, he noted that farmers still faced risks due to weather disturbances.
“The damage of Typhoons Paolo and Ramil might further slow down agriculture and fisheries production in the next quarter,” he said.
Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. said the strong third quarter GDP growth, together with manageable inflation, was in line with expectations and validated current policy settings.
“GDP growth also remains within current potential, which will expand further in the future as investments in both physical and human capital ramp up,” he told reporters.
Espenilla also allayed overheating concerns.
“That begins to be a concern if we’re persistently growing above potential. [We’re] Not there yet. To keep growing strongly without overheating, we expand potential itself — through high quality investments funded in a sustainable manner,” he said.
Faster growth seen
Finance Secretary Carlos Dominguez 3rd also expressed optimism of even better growth, again due to ramped-up infrastructure spending and investments in human capital.
“Notwithstanding the continued political noise and the terrorist activity in Marawi, which President [Rodrigo] Duterte had decisively addressed, the economy managed to perform well in the third quarter as the government posted a double-digit increase in public investments and pursued initiatives to further improve fiscal health and boost investor sentiment,” Dominguez said in a statement.
“Expect a more riveting growth narrative in the fourth quarter and onwards as the Duterte administration shifts to higher gear its unparalleled investment and stimulus program on the strength of the government’s greater absorptive capacity and its resolve to advance its ‘Build Build Build’ infra program as the main driver of the economy.”
Budget Secretary Benjamin Diokno welcomed the third quarter growth, saying it “fell within the government’s target, especially after an election year.”
Malacañang also hailed the news.
“That makes us the second fastest economy in Southeast Asia, next only to Myanmar, because Myanmar is hitting 7 percent,” Palace spokesman Harry Roque said.
“But considering the level of our economy in comparison to Myanmar, I think, ours is still the best performing economy so far,” he added.