PH economy expands a robust 6.6% in 4th quarter
The Philippines continued to be among the fastest-growing countries in the region last year as the economy expanded by a brisk 6.8 percent despite a contraction in the agriculture sector.
Gross domestic product (GDP), the value of goods produced and services rendered, expanded at a 6.6 percent annual rate in October-December—the slowest quarterly growth in 2016 but higher than the 6.3 percent in the same period in 2015.
Economic Planning Secretary Ernesto Pernia said that robust domestic demand underpinned the growth in the fourth quarter, helping to offset a contraction in agriculture and slowing government spending.
While a policy shift in the United States under a Trump presidency and weather disturbances pose risks to economic growth, the Philippines is well-positioned to withstand these and become a upper middle-income by the end of the Duterte administration in 2022, according to Pernia.
Finance Secretary Carlos Dominguez III said the robust growth last year was “clear proof that no amount of counterproductive political chatter from certain quarters could undermine the upward trajectory of a domestic economy that is in pretty good shape under a Duterte presidency that is fully committed to sustaining its growth momentum.”
The brash-talking President Duterte inherited a relatively vibrant economy when he took office in May. He has pledged to slash the poverty rate, but investors are wary of his swashbuckling approach to governing.
Structural shifts
Pernia said the country was “likely either the third or fourth fastest-growing major Asian emerging economy in the fourth quarter after China’s 6.8 percent and Vietnam’s 6.7 percent.”
“For full year of 2016, we are so far the fastest-growing economy with China at 6.7 percent and Vietnam at 6.2 percent,” he added.
Budget Secretary Benjamin Diokno said the 2016 GDP data showed that “there appears to be a structural shift: industry, especially manufacturing, has outpaced services.”
“This has significant impact on the creation of decent jobs. This is consistent with declining unemployment,” Diokno said.
Pernia said agricultural growth was a letdown as it returned to negative territory, reeling from the effects of Typhoons “Karen” and “Lawin” in the fourth quarter.
Also, “the last quarter growth of an election year is usually slower than the first half due to the transition of government, and as investors adopt a ‘wait-and-see’ attitude,” he said.
Pernia said economic managers “believe that the target of 6.5-7.5 percent [growth] for 2017 is highly likely” to be achieved.
“In the medium-term, we expect growth to strengthen further toward 7 percent to 8 percent,” with the economy expanding by about 50 percent in real terms and per capita income rising by over 40 percent over the next six years, he said.
These growth rates, according to Pernia, would put the Philippines by 2022 in the upper-middle income category and reduce poverty incidence to 14 percent, lifting about six million Filipinos out of poverty.
Given the economic growth momentum, the Department of Finance has “all the more reason to aggressively engage in its proposed comprehensive tax reform program and Congress to swiftly act on it so the Duterte administration could raise enough funds for its unparalleled public spending program on infrastructure, human capital and social protection,” Dominguez said.
Risks
Pernia cautioned against risks that may slow economic growth. “For now, our biggest roadblock is extreme weather disturbances like that of the El Niño. The country remains vulnerable to very strong typhoons. There is a strong call to develop our agriculture sector and make it resilient to such shocks,” he said.
He said he was 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.
Pernia told reporters that the Duterte administration would prioritize the agriculture sector, especially through investment in infrastructure in war-torn Mindanao, which used to be the country’s food basket.
He added that “other potential downside risks also include possible policy shifts in the US, greater volatility in capital flows and geopolitical risks.”
While the government has yet to prepare specific actions in response to US President Donald Trump’s shift to protectionism, the country’s solid macrofundamentals will shield the economy from policy shifts in the United States, Pernia said. —WITH A REPORT FROM AP
