The Philippine economy slowed down to 6.1% in the third quarter of 2018 due to weaker household consumption and exports, according to the Philippine Statistics Authority (PSA).
The third-quarter gross domestic product (GDP) is slower than the 7% growth in the same quarter in 2017 and the 6.2% growth, adjusted from 6%, in the second quarter of 2018.
Socioeconomic Planning Secretary Ernesto Pernia said the government is concerned, not because the third quarter GDP was below the 6.3% expectation, but “because the reason for the slowdown, among others, is the slowdown in household consumption, particularly the marked slowdown in the household spending on food and other basic products.”
With this slowdown, Pernia said, the Philippine economy needs to expand by at least 7% in the fourth quarter to attain the low end of the government’s target of a 6.5% to 6.9% GDP for full-year 2018.
The World Bank expects the Philippine economy to grow at an average of 6.5% in 2018, lower than its initial forecast of 6.7%, while the Asian Development Bank projects an average of 6.4% from the previous assumption of 6.8%.
Despite the slowdown, the Philippines remains one of the top performers in the region next to Vietnam’s 7% and China’s 6.5%, and ahead of Indonesia’s 5.2%, Pernia, who is also National Economic and Development Authority (NEDA) director general, noted.
The Cabinet official said the Philippine economy’s growth of at least 6% for 14 consecutive quarters “suggests that we are now on a higher growth trajectory, as we at the NEDA have been saying.”
He said this is why focusing on building capacity in physical infrastructure, human capital, and financial capital is needed.
“We need to encourage the private sector to do the same: expand production capacity and invest in innovation,” Pernia said.
He added that the third-quarter numbers confirm the government’s earlier hypothesis about the weakness of the country’s agricultural sector, which “was not helped by having a highly regulated trading regime, let alone expected weather disturbances.”
On the demand side, robust growth is seen in the demand of the other sectors: government, which grew by 14.3%; demand by firms or business, growing by 16.7%, export demand which grew by 14.3%.
In contrast, household final consumption demand grew by only 5.2% in the third quarter, from a growth of 5.9% in the second quarter. Household spending on food grew only by 2.8% in the third quarter from 6.2% in the previous quarter.
Pernia once again urged Philippine Congress to pass without delay the Rice Tariffication Bill, which is seen to reduce rice prices by P2 to P7 per kilo. He said there is also need to put into action the Philippine Export Development Plan 2018-2022, which aims to boost exports and increase the competitiveness of the industry.
The services sector, which grew by 6.9% in the third quarter, is forecasted to remain as the main driver of growth in the near term. Wholesale and retail trade and other services will primarily support the growth in the services sector, followed by real estate, renting and business activities, and public administration and defense.
The government will also enhance the country’s manufacturing base to accelerate industry growth by implementing relevant policies such as the Inclusive Innovation Industrial Strategy and the Manufacturing Resurgence Program. This will increase the capacity and competitiveness of firms as well as strengthen their linkages to domestic and global value chains.
Pernia said the recent resumption of activities in Boracay will boost services growth over the medium term.
“This administration remains committed and has the political will to reach our revised growth target for the year. We do acknowledge that this will be a tall order. Nevertheless, we work towards and anticipate sustained growth next quarter,” the Cabinet official said.
