Economy slows down to lowest level in 3 years
MANILA, Philippines—Port congestion, reduced government spending as a result of the Supreme Court ruling striking down the Disbursement Acceleration Program (DAP), and lower agricultural output dragged the economy in the third quarter to its slowest pace of growth in almost three years.
The disappointing 5.3-percent expansion is expected to make it more difficult for the country to reach its full-year gross domestic product (GDP) growth target of 6.5-7.5 percent.
On Thursday, the Philippine Statistics Authority (PSA) announced the third-quarter economic performance, the lowest GDP growth rate since the 3.7 percent posted in the fourth quarter of 2011. The GDP measures the total value of goods and services produced in a country.
The 5.3-percent growth in July-September was likewise lower than the 7 percent in the third quarter of 2013, 5.7 percent in the first quarter of this year and 6.4 percent in the second quarter.
The Philippines’ third quarter growth rate was nonetheless the fourth fastest in the region after those of China (7.3 percent), Vietnam (6.19 percent) and Malaysia (5.6 percent), Socioeconomic planning Secretary Arsenio M. Balisacan said in a press conference.
As for the full-year GDP growth goal of 6.5-7.5 percent, Balisacan, also director general of the National Economic and Development Authority (Neda), conceded that the economy may expand by only 6-7 percent.
The average GDP for the first nine months of the year was estimated at 5.8 percent, Balisacan said.
Big challenge
While the Aquino administration was keeping the 2014 target for now, Balisacan said hitting at least 6.5-percent growth would be “a big challenge.”
To reach the lower end of the 2014 projection, the economy must grow by at least 8.2 percent in the fourth quarter, while a lower 6.2-percent expansion during the October to December period is needed to hit at least 6-percent GDP growth for the entire year, Balisacan said.
In a report, the PSA noted that the services sector continued its downward trend that began in the first quarter, despite growing by 5.4 percent in the third.
The industry sector slowed to 7.6 percent from 7.7 percent in the third quarter of 2013 and 7.9 percent in the second quarter.
Contraction in agri
The output of the agriculture sector suffered a 2.7-percent contraction in the third quarter, reversing the positive gains made last year and during the previous quarter.
The PSA blamed the decline in overall agricultural production “largely to the dismal performance of palay, forestry and corn.”
“Among the three major economic sectors, services gave the highest contribution to the GDP growth in the third quarter with 3.1 percentage points … [f]ollowed by industry with 2.4 percentage points, while the whole agriculture sector pulled down GDP growth with negative 0.3 percentage point,” said national statistician Lisa Grace S. Bersales.
Port congestion
While the economy during the previous quarters was dragged by the impact of Supertyphoon “Yolanda” (international name: Haiyan) that flattened Eastern Visayas late last year, this time, the slowdown in economic activity was brought about mainly by the congestion at the country’s ports until September as well as slower disbursement of money from the government.
“Port congestion could have possibly affected the growth of exports and imports. There is sufficient evidence as well as anecdotal evidence for that,” Balisacan said.
The rise in export sales slowed to 9.8 percent in the third quarter from double-digit increases in the same period last year as well as the preceding quarter.
As for imports, the value of goods and services from abroad grew 5.8 percent during the June to September period, better than the 3.1 percent registered in the second quarter but way below the robust 17.3 percent posted in the third quarter of 2013.
Manila truck ban
The daytime truck ban implemented in Manila from February to mid-September stalled the movement of goods in and out of the country’s biggest and busiest ports in the capital city, which also resulted into higher prices of a number of basic goods.
PSA data showed that the increase in household consumption further slowed to 5.2 percent during the third quarter from 5.7 percent in the second quarter and 6.2 percent in the third quarter of last year.
“The port congestion problem affected prices and consumption. It’s all interrelated,” Balisacan noted.
In terms of government expenditures, spending by government agencies dropped by 2.6 percent year-on-year during the third quarter from flat growth in the second quarter as well as a 7-percent expansion in disbursements between July and September last year.
DAP ruling’s adverse effect
Balisacan admitted that the Supreme Court decision on the controversial Disbursement Acceleration Program (DAP) earlier implemented by the Aquino administration had “chilling effects” on how government agencies spend their fund allocations.
The DAP was a stimulus program launched by Malacañang in 2011 ostensibly to pump-prime the slowing economy through a number of ways, including the pooling of unspent funds and allocating them for projects not included in the budget.
But the Supreme Court declared such practices unconstitutional, particularly the release of savings by the executive branch to other agencies, as well as the funding of projects not listed in the budget law.
Deputy Speaker Giorgidi Aggabao said the DAP ruling “most definitively” had an adverse effect on the economy resulting in the decrease in infrastructure spending.
COA more watchful
Balisacan also noted that many agencies had been more careful in their disbursements amid a more watchful eye of the Commission on Audit (COA).
“COA is making sure that all relevant circulars are being followed. Many agencies had been issued notices of disallowance,” he said.
But Balisacan said he expected the slower government spending to pick up in the fourth quarter until the first two quarters of next year, mainly on the back of fast-track efforts to rehabilitate Yolanda-devastated areas under the master plan signed last month.
No pain, no gain
Agencies are also being assisted by the Department of Budget and Management (DBM) so that they can adjust to the more stringent disbursement rules and requirements to speed up compliance.
“It’s worth taking these pains because as the saying goes, ‘no pain, no gain.’ We need a lot of reforms to lift the economy to a higher growth trajectory,” Balisacan said.
For its part, the DBM pledged on Thursday to “make definite improvements in government spending, after public expenditures contracted by 2.6 percent in the third quarter.”
In a statement, Budget Secretary Florencio B. Abad said the decline 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.”
Chilling effect
“It must be mentioned that uncertainties in the wake of the high court’s decision on the DAP played a crucial role in this development, as the ruling may have sent a chilling effect across the bureaucracy’s expenditure practices, Abad said.
“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.
The additional procurement requirements, the delays in Yolanda rehabilitation efforts and the issues on NCAs are being addressed to fast-track spending, the budget secretary said.
“Already, we are addressing these issues by reviewing the quarterly lapse period for NCAs, with the possibility of shifting this to a monthly basis,” he said.
Special Purpose Funds
Abad added that disbursements for the fourth quarter would accelerate by 6.7 percent with the release of appropriations from the Special Purpose Funds, as well as other items that need the submission of special budget requests and documentary requirements.
These include the Basic Educational Facilities under the Department of Public Works and Highways, the Rehabilitation and Reconstruction Program, the National Disaster Risk Reduction Management Fund, and the Department of Agriculture’s farm-to-market road projects.
For his part, Finance Secretary Cesar V. Purisima expressed optimism that “growth will further pick up as we strengthen our economic and good governance reforms in the tail end of this administration.” With a report from DJ Yap
Originally posted: 12:56 PM | Thursday, November 27th, 2014
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