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Saturday, June 24, 2017 | MANILA, PHILIPPINES
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   economic indicators

Date posted: Friday, August 19, 2016 | Manila, Philippines

BY Lourdes O. Pilar Senior Research Assistant and Lucia Edna P. de Guzman

PHL’s Q2 growth among Asia’s fastest

THE PHILIPPINE ECONOMY grew at its quickest pace in three years last quarter, possibly allowing it to regain its stature as one of Asia’s best performers.

In a report, the Philippine Statistics Authority (PSA) said the country’s gross domestic product (GDP) expanded by 7% year-on-year in the three months ending June, accelerating from the 5.9% recorded in the same period last year.

The latest growth figure is above the median of 6.8% in a BusinessWorld poll conducted last week, and the fastest quarterly expansion since the 7.9% recorded in the same period of 2013.

The second-quarter GDP growth brings the first-half expansion to 6.9%, faster than the 5.5% in the same period last year and within the government’s full-year target range of 6-7%.



Socioeconomic Planning Secretary Ernesto M. Pernia said the second-quarter expansion means the Philippines is likely the second-fastest, if not the fastest in the region, given China’s 6.7%, Vietnam’s 5.6%, Indonesia’s 5.2%, Malaysia’s 4% and Thailand’s 3.5%. Only India is forecast to grow at an equally fast 7%.

Finance Secretary Carlos G. Dominguez III said the robust expansion puts the economy on track to hit the Duterte administration’s target for 2016.

“We aim to sustain and even boost this strong growth momentum by accelerating spending on infrastructure and investing heavily in human capital, along with overhauling the tax system and rationalizing fiscal incentives to further stimulate the economy,” Mr. Dominguez added.

Investments led growth in the second quarter of the year, expanding by 27.2% or more than double the 12.7% in the same period last year. Fueling this expansion were durable equipment purchases and construction, with public construction alone increasing by 27.9%.

Consumer spending, which comprised 66.7% of GDP, grew by 7.3%, faster than the 6.5% a year ago, while government expenditures increased by 13.5%, up from 2.4% last year.

External trade was the damper, falling 14.3%.

On the supply side, services led growth as real estate, trade and “other services” drove expansion. Services grew by 8.4%, up from last year’s 6.7%, whereas industry increased by 6.9%, also faster than the 6.1% the previous year.

In contrast, agriculture contracted by 2.1% slightly sharper than last year’s 0.1%.

“[T]he previous administration gave us a strong and stable economy that we can build on further by maintaining the sound macroeconomic, fiscal, and monetary policies already in place,” Mr. Pernia, who is director-general of the National Economic and Development Authority (NEDA), said in a statement.

“However, the challenge is to make this growth inclusive such that more people contribute to, and benefit from it. For this, we must improve the competitiveness of our markets and business climate to take advantage of the new surge of investments in the region,” he said.

“Importantly, we must look at the sectors and geographic areas that have been lagging behind and determine how to improve their access to these opportunities.”

THE NAME OF THE GAME
Nicholas Antonio T. Mapa, research officer for market research and strategy at the Bank of the Philippine Islands, said the country showed its neighbors how a domestic-oriented economy can weather the slowdown in global trade. “The name of the game in an environment of slowing global trade is (how fast can you consume) and the Philippines has plenty where that came from,” he said.

Jose Mario I. Cuyegkeng, senior economist at ING Bank-Manila, forecasts 6% second-half GDP growth, citing “so much momentum from domestic demand factors.”

“The government and the private sector are likely to continue to expand the absorptive capacity of the economy. We expect imports in the coming months to reflect the investment-led growth which would form a sound base for above 6% growth in 2017,” he said.

“Favorable utilization of the fiscal leeway by the previous administration would extend in 2H and in 2017 while private consumer spending would be firmly supported.”

Mr. Cuyegkeng expects the Duterte government’s tax reform package to generate higher disposable incomes, which would sustain domestic consumption.

Peter Angelo V. Perfecto, executive director of the Makati Business Club, said the second-quarter GDP figure “reflects a strong post-election Philippine economy.”

“Supported by strong domestic consumption, continuous inflow of OFW (overseas Filipino worker) remittances and increased investments, we believe that this positive growth will continue as the Duterte administration pursues genuine regulatory and structural reforms, calls for legislative measures that aim to improve the business climate, and implements relevant social development programs to sustain the increase of household consumption and labor productivity,” Mr. Perfector said.

NEDA’s Mr. Pernia said the government is looking at 7-8% GDP growth in the medium-term, to “be supported by sustained and deepened reforms… include[ing] a comprehensive tax reform, sustained investment in infrastructure, easing of restrictions on foreign investments, reduction of cost of doing business and strengthening of agro-industrial linkages.”

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