GDP growth slowed to 6.5% in Q2

Economic growth slowed to 6.5 percent year-on-year in the second quarter despite a boost from government spending on public goods and services as private sector investments lagged, the government reported yesterday.

The gross domestic product (GDP) expansion in April to June was lower than the 7.1-percent growth posted in the same period last year but a bit faster than the 6.4 percent in the first quarter.

Socioeconomic Planning Secretary Ernesto M. Pernia said the Philippines remained among “the best-performing economies in Asia,” as the second-quarter GDP growth surpassed Vietnam’s 6.2 percent and Indonesia’s 5 percent.

“This puts the country as either the second or third fastest growing Asian economy, next only to China whose growth rate in the second quarter was 6.9-percent. Malaysia and Thailand have not yet released their data, but we can expect they will be lower than the performance of the Philippines,” said Pernia, who heads state planning agency National Economic and Development Authority.

The second quarter also marked the eighth-straight quarter that GDP growth exceeded 6 percent, Philippine Statistics Authority data showed.

Pernia said the historically slower expansion in the year following an election year was still evident, although the gap between the growth rates last year and this year was narrower than those after the presidential elections in 2010 and 2004. Election spending boosts economic growth in the first half of an election year.

From 6.9 percent and 7.1 percent in the first two quarters of 2016, GDP expansion eased to 6.4 percent and 6.5 percent in the same period this year.

In contrast, the 7.2 percent and 7.9 percent in the first and second quarters of 2004 significantly dropped to 5.1 percent and 5.4 percent in 2005, while the 8.4 percent and 8.9 percent enjoyed in the first half of 2010 declined to 4.6 percent and 3.2 percent in 2011.

Also, Pernia noted that in the second quarter, the government stepped up its spending performance while the private sector “slackened.”

To recall, the government blamed the lower-than-expected 6.4-percent growth in the first quarter mainly on slower government spending, higher prices of consumer goods, as well as the dissipated impact of election-related expenditures last year.

In the second quarter, “government consumption expanded by 7.1 percent from 0.1 percent in the first quarter of 2017,” Pernia said.

In contrast, growth in private investments slowed to 8.7 percent from 10.6 percent in the first three months.

As for the supply side, the “industry was at 7.3 percent, supported by the growth in the manufacturing, and mining and quarrying sectors,” Pernia said.

“The agriculture sector continued to recover from El Niño, expanding by 6.3 percent. Meanwhile, the services sector continued to be the main driver of growth despite the slower growth of 6.1 percent relative to last year’s 8.2 percent and the previous quarter’s 6.7 percent,” he added.

Since economic growth averaged 6.5 percent in the first half, Pernia said he was optimistic that the full-year GDP expansion would be between 6.5 percent and 7 percent.

In a statement, Finance Secretary Carlos G. Dominguez III said the sustained strong economic expansion in the second quarter was “solid proof that the year-old administration has been making the right moves at the right time in pursuit of President Duterte’s socioeconomic agenda on high—and inclusive—growth.”