Indicator points to growth slowdown

AP FILE PHOTO

The composite leading economic indicator (LEI) for the first quarter dropped from the figures recorded previously, signaling a potential slowdown of economic growth in the first three months.

The Philippine Statistics Authority (PSA) has reported that the composite LEI for the first quarter settled at 0.037, falling from 0.056 and 0.141 in the first and fourth quarters of last year, respectively.

“The composite LEI exhibited a downward direction in the first quarter. This indicates that the country’s economic activity may slow down during the quarter,” the PSA said in the report.

The Philippine economy, measured in terms of the gross domestic product (GDP), grew by 7.7 percent and 6.5 percent in the first and fourth quarters of last year. The country’s average GDP growth last year stood at 7.2 percent, estimated to be the second-fastest in Asia after China’s.

The composite LEI is a basket of 11 key indicators that largely influence economic growth for a period. According to the PSA, three of the 11 indicators had positive contributions. These were the number of new businesses, the terms of trade index (the proportion of export earnings to import spending), and the consumer price index (CPI). Together, the three accounted for 27.3 percent of the overall index.

The positive impact of the three to the overall index was dragged by the eight other indicators—merchandise imports, stock price index, money supply, visitor arrivals, foreign exchange rate, electric energy consumption, wholesale price index, and hotel occupancy rate.

Together, these eight negative contributors accounted for 72.7 percent of the total index.

The positive contributions of “number of new businesses,” “terms of trade index” and “consumer price index” were consistent with views raised earlier by government economists. In particular, economic officials had said that business confidence was improving, and so investments and expansion of existing businesses could be expected. Moreover, improving global demand could cause export revenues to increase.

On the other hand, the negative contributions of several other indicators to the overall index were consistent with previous reports on the depreciation of the peso, flight of portfolio capital and potentially adverse impact of recent natural calamities on tourism.

The composite LEI is commonly used as a forecasting tool for economic growth. The figures for each of the 11 components, however, are arrived at using projections based on preliminary rather than final data.

The government has set its economic growth target for this year at a range of 6.5 to 7.5 percent.

Economic Planning Secretary Arsenio Balisacan, who is also director general of the National Economic and Development Authority, earlier said the growth target was attainable, citing the positive outlook on exports, investments, government spending and household consumption.