(Updating with more details and comments from NEDA)
The Philippine economy grew 6.4 percent year-on-year in the second quarter of 2014, gaining pace since the slowdown seen in the first quarter but still lower than the year-earlier rate, official figures just released by the National Economic and Development Authority (NEDA) and the Philippine Statistics Authority (PSA) show.
Growth in gross domestic product (GDP) in the April-June period this year accelerated from the revised 5.6 percent recorded for the January-March quarter, but still lagged the year-earlier rate of 7.9 percent.
For the first half of 2014, cumulative growth reached 6.0 percent, compared with 7.8 percent in the corresponding period of 2013, according to the data.
“This higher growth rate, coming from a high base a year ago shows that the economy is back on the higher trajectory of growth registered in 2012 and 2013 and bodes well for economic growth for the rest of 2014,” Socioeconomic Planning Secretary and NEDA Director General Arsenio Balisacan told reporters on Thursday.
Balisacan said the Philippines remains as one of the bright spots in the region, the second fastest growing economy among major Asian countries for the period. The country tied with Malaysia’s performance and topped the second-quarter economic performance of the other major members of the Association of Southeast Asian Nations. Indonesia posted 5.1 percent growth and Thailand, 0.3 percent, in the same period.
Supply side strong
On the supply-side, most sectors demonstrated strong growth, except for construction.
Agriculture grew by 3.6 percent, a rebound from a 0.2 percent contraction in the second quarter last year due to the big turnaround in major crop harvests. Industry expanded by 7.8 percent, partly moderated by the weak performance of the construction industry.
“Although private construction increased by 12.7 percent during the second quarter compared to last year, public construction … recorded a significant reduction in the second quarter,” Balisacan said.
The decline in public construction was traced to lower spending in infrastructure and other capital outlays, particularly in the months of April and May 2014, as major government agencies posted lower-than-programmed disbursements.
There was notable development in the gross value added in manufacturing, which accelerated to 10.8 percent in the period, buoyed by strong external demand and household final consumption, the Socioeconomic Planning secretary said.
Increased demand for business process management and the expansion of economic activities accounted largely for the 6 percent expansion in the services sector.
Weak govt spending
On the demand-side, net exports contributed 4.2 percentage points and household consumption accounted for 3.6 percentage points to the growth rate amid a more positive global economy, favorable business sentiment, and robust inflows of overseas Filipinos remittances.
Balisacan said the strong household spending in the second quarter reflects the still upbeat consumer sentiment in the country. However, he pointed out that the slowdown in disbursements in personal services and maintenance and other operating expenditures accounted for flat growth in government consumption.
“Certainly, government underspending in this quarter is a cause for concern. But we assure you that the government is aware of this and is taking the right steps to address bottlenecks in the implementation of critical programs and projects, particularly key infrastructure projects,” he said.
Achieving full-year target
Overall, the NEDA chief said there is still a strong likelihood that the country will achieve the full-year growth target of 6.5 to 7.5 percent.
Balisacan said preliminary indications of the Business Expectations Survey (BES) of the central bank show that businesses are maintaining their positive outlook on the economy.
The BES is a quarterly survey of firms conducted by the Bangko Sentral ng Pilipinas. Survey results for the third quarter are due out on Friday.
Despite this, Balisacan said the government is aware that market players want more positive signals, in particular the public sector’s key role in infrastructure spending and consumption of non-durables.
“We would like to assure you that the identified administrative bottlenecks that contributed to the underperformance of the government sector are being addressed. In fact, disbursements in June increased by almost 45 percent and we are confident that the government will catch up on its work program for the year,” Balisacan said.