Economy grew 5.6% in Q2

Improved government spending helped the economy expand faster in the second quarter, although Socioeconomic Planning Secretary Arsenio M. Balisacan conceded on Thursday that the growth target for the year would no longer be achieved.

The second-quarter gross domestic product (GDP) grew by 5.6 percent, higher than the 5-percent expansion in the first quarter, but slower than the 6.7-percent growth posted in the second quarter of last year, National Statistician Lisa Grace S. Bersales said in a press conference.

The Philippine GDP growth was the third-highest among Asia’s major economies behind China and Vietnam.

The growth in the services and industry sectors inched up to 6.2 percent and 6.1 percent during the April to June period, respectively, from 5.4 percent and 5.5 percent a quarter ago, Philippine Statistics Authority (PSA) data showed.

For Finance Secretary Cesar V. Purisima, the higher second-quarter GDP growth figure “proves our mettle as a resilient haven in these turbulent times.”

“The Philippines’ resilience continues to differentiate the country as a bedrock of stability in the region as we push on with brighter prospects” despite neighboring China’s economic woes, Purisima said.

“Of 10 Asian economies, China’s economic slowdown will have the smallest impact on the Philippines. While trade with China has risen significantly in recent years, China’s share in our total trade with the world only accounts for 12 percent, reflecting a diversified trading position. Further, the Philippines’ externally induced growth drivers, such as remittances and BPO receipts, have minimal links with China’s economy,” he added.

Agriculture contracts

The output of the agriculture sector, however, contracted by 0.5 percent in the second quarter, reversing the 1.1-percent increase in the first quarter as well as the 3.4-percent growth recorded in the second quarter of last year.

Services contributed 3.5 percentage points to the 5.6-percent expansion registered in the second quarter, while industry accounted for 2.1 percentage points. Agriculture slashed 0.05-percentage points from the GDP growth.

Household consumption

PSA data showed that during the second quarter, household consumption rose 6.2 percent; government consumption, up 3.9 percent; and investment, up 17.4 percent.

Exports of goods, however, slid 3 percent, even as services exports jumped 31.1 percent during the period.

Balisacan attributed the second-quarter rebound to “significant improvement in government spending, especially public construction” as well as “strong performance of the private sector.”

Balisacan noted that public construction grew by a strong 20 percent in the second quarter, reversing the 24-percent decline in the first quarter.

Spending bottlenecks

“This is a result of government’s efforts to address issues on spending bottlenecks, especially for public infrastructure, which held back growth in the first quarter. This significant improvement gives us more confidence about the performance of the public sector in the coming quarters of the year,” said Balisacan, who is also the director general of the National Economic and Development Authority (Neda).

BPO

As for the private-sector contribution to the economy, Balisacan pointed out that services continue to be robust, especially business process outsourcing (BPO).

“The second-quarter GDP growth shows the expanse of the country’s resiliency from the prevailing weakness of the global economy. This growth is currently the third-highest among Asia’s major economies, behind China and Vietnam,” Balisacan noted.

“With this positive development in key areas of the country’s growth, we are now looking at an economy that can sustain a high growth trajectory in the future quarters,” the Neda chief added.

Scaled down

However, Balisacan conceded that the 7-8 percent GDP growth goal for the year could no longer be achieved, hence economic managers “will scale down the target.”

He said the “realistic” growth figure for 2015 would be 6-6.5 percent.

Balisacan disclosed that the Cabinet-level, interagency Development Budget Coordination Committee would soon meet “to decide on projections for the rest of the year.”

The Neda chief also pointed out the more pressing need to “ensure that the growth momentum is sustained… amid ongoing events in the global economy that may affect the country.”

“The quality and the rate of current growth of the Philippine economy give us some assurance that, with greater vigilance and persistence in pursuing economic and governance reforms, we can withstand the volatile markets overseas.

“As one of the countries with a respectable growth compared with other emerging Asian economies, the Philippines remains an attractive market and investment destination. Our economic fundamentals are still strong. Thus, we have to ensure that we keep on improving this kind of environment to secure stability of the domestic economy and encourage more investments for the generation of much-needed high-quality job opportunities,” he said.

El Niño effect on economy

Moving forward, among the challenges that Balisacan sees affecting the economy is the effect of the lingering dry spell brought about by El Niño.

“The only downside risk [to growth this year] is El Niño, which is expected to impact on agriculture,” he said. “With the continuing threats of El Niño, we need policies that enable government to quickly respond to calamities and address the needs of various affected sectors.”

Also, Balisacan said the government had to “continue improving the absorptive capacity of government to spend available resources well and to efficiently implement crucial programs and projects throughout the country.”

“We need to pay particular attention to infrastructure development, especially transportation networks and power, which are very critical for a growing economy. We need to keep pushing for more public and private investments within the local economy that can help increase the number of available high-quality jobs and improve incomes of Filipinos,” he said.

The Neda chief noted the fears about the peso’s depreciation. “(A)s long as the depreciation is not sharp, the overall net effect of this development is still positive for the economy, especially for our workers,” he said.

In a statement, Budget Secretary Florencio B. Abad pledged to further “ramp up efforts to ensure faster disbursements.”

“Robust government spending was a driving force in our GDP growth in the second quarter. As departments and agencies catch up on their spending programs, we find ourselves well-placed to support deeper and broader development in the country,” Abad said.

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