Philippine economic growth accelerated to 6.8 percent last year, the fastest full-year pace since 2013, on the back of manufacturing, trade, and real estate activities as the main drivers of growth in the fourth quarter.
For the fourth quarter of 2016, gross domestic product (GDP) grew 6.6 percent, moderating from 7 percent in the third quarter. But it was enough to boost the full-year pace to its fastest in three years, the Philippine Statistics Authority (PSA) reported on Thursday.
“Among the major economic sectors, Industry had the fastest growth at 7.6 percent, higher than the previous year’s 6.5 percent growth,” national statistician Lisa Grace Bersales said in a press conference on the 2016 national income accounts.
“Services decelerated by 7.4 percent from 7.8 percent growth in the fourth quarter of 2015. On the other hand, Agriculture declined further by 1.1 percent. In the same period of the previous year, it dropped by 0.2 percent,” Bersales noted.
Growth in 2016 topped the 5.9 percent rate registered in 2015 and 6.2 percent in 2014. The economy grew by 7.1 percent in 2013.
The new rate of growth settled within the 6.7 percent to 7 percent forecast range by private analysts polled by The Manila Times, and within the government’s 6 percent to 7 percent target.
At 6.8 percent, the Philippines could be the second fastest growing economy in Asia for 2016, with China growing at 6.7 percent and Vietnam at 6.2 percent, according to the National Economic and Development Authority (NEDA).
Socioeconomic Planning Secretary Ernesto Pernia sees the industry sector staying vibrant with the construction industry expected to be in the limelight following the government’s commitment to approve and implement critical infrastructure projects.
The services sector is expected to remain strong, supported by moderate inflation, tourism and retail trade, as well as a healthy financial system, sustained growth of remittances and continuing growth of the information technology-business process management (IT-BPM) sector.
“Domestic demand has so far remained buoyant, and should continue to provide support to economic growth in the near to medium-term. Improved employment prospects and favorable income conditions will underpin the growth in household consumption,” Pernia said.
Given the 2016 GDP results, the Cabinet official said the government’s target of 6.5 percent to 7.5 percent for 2017 is “highly likely” to be achieved.
In the medium term, growth will strengthen further to between 7 percent to 8 percent, he said, explaining that the economy will expand by about 50 percent in real terms and per capita income by over 40 percent over the next six years.
“This should bring us to the upper middle income category standing by 2022. More importantly, we hope to reduce the poverty incidence to 14 percent by 2022, thereby lifting about 6 million Filipinos out of poverty,” Pernia said.
But going for the goal is not without risks, Pernia, who is also the NEDA chief, warned, citing the impact of bad weather, the policy shifts in the United States and the geopolitical situation. “For now, our biggest roadblock is an extreme weather disturbance like that of the El Niño.”
He said there is a need to develop the agriculture sector and make it resilient to such shocks.
“We are deeply concerned about the contraction of the crops sector in the fourth quarter following a contraction the previous year. More disturbing is the performance of the fishery subsector that remained in negative territory for almost seven years now (except only in 2013),” he said.
Reducing the cost of food, especially rice, is important to reducing poverty. At the same time, there is a need to raise productivity in the agriculture sector by helping farmers transition to higher value crops and making technology easily accessible, the chief economic planner said.
“Other potential downside risks include possible policy shifts in the US, greater volatility in capital flows, and geopolitical risks. Thus, the government needs to remain vigilant and consider potential repercussions to the Philippine economy,” he said.
Nurturing entrepreneurship and attracting investment for higher-paying quality jobs, especially outside of Metro Manila are significant goals that must be reached, Pernia said.
To make such things happen require a secure and stable economic and political environment, he said, noting the relevant role of policy statements that are consistent and predictable in each branch of government. At the very least, the policy must not be logically inconsistent across the three branches of government.
“Moreover, we need to ensure that our sectors are resilient and diversified in both of products and markets. In particular, we need to champion innovation and diversification in the industry sector as it is still heavily dependent on external demand,” he said.
In the services sector, Pernia cited the need for a policy environment that makes it easier for firms to set up and operate businesses and heed regulations.
“In this respect, we need to make our regulatory system much more efficient and transparent,” he said.
MAYVELIN U. CARABALLO