Philippine GDP growth drops to three-year-low

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Manila street view © Arno Maierbrugger

Economic growth in the Philippines slowed to six per cent during the second quarter of the year, the Philippine Statistics Authority said on August 9. This marked a three-year low and missed all economists’ estimates. Stocks and peso fell.

Gross domestic product (GDP) growth was lower than the already revised first quarter figure of 6.6 per cent and also weaker than the 6.7 per cent recorded during the same period last year. Estimates in the market had ranged from 6.6 per cent to as high as seven per cent.

Economists seeking the reasons pointed out that the slowdown could be attributed to policy decisions which would “promote sustainable and resilient development.”

For example, the temporary closure of the holiday island of Boracay made a dent on the economy with growth in exports of services slowing to 9.6 per cent in the second quarter from 16.4 per cent in the first quarter.

There were also new regulations in the mining sector, namely the closure of several mining pits and the excise tax on non-metallic and metallic minerals, so that the mining and quarrying sector showed a lackluster performance and was down by 10.9 per cent. Moreover, stricter enforcement of regulations on aquaculture producers resulted in the drop of fish catch.

Another factor is the persistently high inflation, driven by rising prices for food and beverages, housing, water, electricity, gasoline, transportation and health care costs, which undercuts GDP growth further.

On a macroeconomic level, a deteriorating political climate and President Rodrigo Duterte’s autocratic tendencies are putting off investors and became a risk to further growth. Pledges of foreign investment are already at their weakest since 2010, and the Philippines is gradually losing its appeal as a – relatively – attractive place to do business.

On the upside, the still respectable GDP growth in the second quarter was mainly driven by manufacturing, trade and construction. The latter sector clearly benefitted from Duterte’s ”Build, Build, Build” programme which bodes well for the construction industry and is seen to boost not only public construction, but private builders as well.

Duterte is setting on the strategy of building public roads and railways, including a subway in traffic-clogged Manila, to boost the economy. He is also pushing for the immediate entry of a third telecommunications player to enhance efficiency of communications and in turn support the growth of small businesses, particularly retail trade.

The government is still targeting to expand the economy by seven to eight per cent for this year. According to Economic Planning Secretary Ernesto Pernia, GDP needs to grow 7.7 per cent in the second half of 2018 to meet this goal, a target called into question by most analysts and economists given the current economic trend in the country.

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Reading Time: 2 minutes

Manila street view © Arno Maierbrugger

Economic growth in the Philippines slowed to six per cent during the second quarter of the year, the Philippine Statistics Authority said on August 9. This marked a three-year low and missed all economists’ estimates. Stocks and peso fell.

Reading Time: 2 minutes

Manila street view © Arno Maierbrugger

Economic growth in the Philippines slowed to six per cent during the second quarter of the year, the Philippine Statistics Authority said on August 9. This marked a three-year low and missed all economists’ estimates. Stocks and peso fell.

Gross domestic product (GDP) growth was lower than the already revised first quarter figure of 6.6 per cent and also weaker than the 6.7 per cent recorded during the same period last year. Estimates in the market had ranged from 6.6 per cent to as high as seven per cent.

Economists seeking the reasons pointed out that the slowdown could be attributed to policy decisions which would “promote sustainable and resilient development.”

For example, the temporary closure of the holiday island of Boracay made a dent on the economy with growth in exports of services slowing to 9.6 per cent in the second quarter from 16.4 per cent in the first quarter.

There were also new regulations in the mining sector, namely the closure of several mining pits and the excise tax on non-metallic and metallic minerals, so that the mining and quarrying sector showed a lackluster performance and was down by 10.9 per cent. Moreover, stricter enforcement of regulations on aquaculture producers resulted in the drop of fish catch.

Another factor is the persistently high inflation, driven by rising prices for food and beverages, housing, water, electricity, gasoline, transportation and health care costs, which undercuts GDP growth further.

On a macroeconomic level, a deteriorating political climate and President Rodrigo Duterte’s autocratic tendencies are putting off investors and became a risk to further growth. Pledges of foreign investment are already at their weakest since 2010, and the Philippines is gradually losing its appeal as a – relatively – attractive place to do business.

On the upside, the still respectable GDP growth in the second quarter was mainly driven by manufacturing, trade and construction. The latter sector clearly benefitted from Duterte’s ”Build, Build, Build” programme which bodes well for the construction industry and is seen to boost not only public construction, but private builders as well.

Duterte is setting on the strategy of building public roads and railways, including a subway in traffic-clogged Manila, to boost the economy. He is also pushing for the immediate entry of a third telecommunications player to enhance efficiency of communications and in turn support the growth of small businesses, particularly retail trade.

The government is still targeting to expand the economy by seven to eight per cent for this year. According to Economic Planning Secretary Ernesto Pernia, GDP needs to grow 7.7 per cent in the second half of 2018 to meet this goal, a target called into question by most analysts and economists given the current economic trend in the country.

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