THE Philippine economy lost some steam in the first quarter with growth moderating to 6.4 percent on slower government spending, and as the impact of election spending dissipated.
In the first three months of the year, gross domestic product (GDP) growth slowed from 6.9 percent a year earlier, and from 6.6 percent in the final quarter of 2016, the Philippine Statistics Authority reported on Thursday.
Growth stood at the low end of the 6.4-percent to 7.2-percent forecast range of private analysts polled by The Manila Times. The government had set a 6.5-percent to 7.5-percent target range for the full year.
Growth in the first quarter of 2017 was the slowest in five quarters, or since the 6.3 percent posted in the fourth quarter of 2015.
“Our first-quarter performance bodes well for the economy as it is broadly in line with our target of 6.5 percent to 7.5 percent for this year. It is, however, lower than [expected], and for this we were somewhat downcast because we were expecting something like around the midpoint of the growth range of 6.5 percent to 7.5 percent,” Socioeconomic Planning Secretary Ernesto Pernia said in a news conference in Pasig City.
Pernia, who heads the National Economic and Development Authority (NEDA), said the slower GDP growth could be explained by “base effects,” as growth last year was high because of election spending.
“[A]s you would already know by now, the impact of [election spending]has already dissipated,” he said.
The NEDA chief also said the changing of the guards in the government and reorientation of programs took time to settle, which slowed government spending for the quarter.
In a presentation, Pernia showed that growth in government final consumption expenditure slowed to 0.2 percent in first-quarter 2017 from 11.8 percent a year ago.
“Note, however, that this was better than during the previous administration where government consumption spending and public construction contracted by about 15 percent and 37 percent, respectively,” he said.
“Of course, this could also mean that we have benefited from reforms that have been put in place by the previous administration,” he added.
Pernia said the strategy of the Duterte administration is to sustain the good practices of previous administrations.
Other weak areas
Pernia also noted a slowdown in household spending and capital formation.
Household final consumption expenditure growth slackened to 5.7 percent at end-March 2017 from the 7.1-percent expansion a year ago.
Capital formation also lost pace at 7.9 percent in the first three months of the year, from a year ago’s 31.5 percent.
Still, the Philippines remains one of the strongest performers among the major emerging economies in Asia.
In the first quarter, the Philippines overtook Vietnam and Indonesia, which grew by only 5.1 percent, and Thailand, which grew by only 3.3 percent.
“We are only second to China’s growth of 6.9 percent while India’s number hasn’t come out yet,” Pernia said.
“On the demand or expenditure side, the economy remains strong, even with the slowdown in household spending and capital formation,” the Cabinet official added.
With improving global demand, growth in exports was robust, with goods exports up by 22.3 percent, the fastest since the third quarter of 2010, and exports of services up by 14.3 percent.
On the supply side, agriculture made a comeback with a 4.9-percent growth rate after several quarters of decline.
The services sector continued to be the main driver of growth as it grew by 6.8 percent.
Industry rose by 6.1 percent, which Pernia said was “respectable” given the boost in manufacturing. This was tempered however by a slowdown in construction and utilities and a decline in mining and quarrying, he said.
‘Cycles of development’
Malacañang on Thursday said the Philippine government was “on the right track” even as growth slowed in the first quarter.
In a news conference, presidential spokesman Ernesto Abella said the Philippine economy was “still leaping” despite the slower pace of growth.
“There are cycles of development…There are cycles of growth, right? But so far…we are very much on the right track towards growth,” Abella told reporters.
“I suppose it all depends on the perspective regarding that. But right now, we are growing and right now we’re improving, and right now things are vastly being improved especially with the influx of investors coming from the region, coming from China, coming from Japan, coming from other areas,” he added.
The Palace official lauded the increase in personal remittances from overseas Filipinos workers (OFWs).
The Bangko Sentral ng Pilipinas said OFWs sent home $2.9 billion in March, up 11.8 percent. This led to an 8.1-percent increase in personal remittances for the first quarter of 2017, amounting to $7.7 billion, Abella noted.
“Such increase underscores the strong demand for the skills and the competence of the great Filipino workers,” the Palace official said.
WITH CATHERINE S. VALENTE