(Update) Philippine GDP hits 6.4 percent, lower than expected

May 18, 2017

  Philippine economic growth slowed to 6.4 percent in the first quarter, lower than expected, after effects of election spending last year dissipated and due to lower government spending, Socioeconomic Planning Secretary Ernesto Pernia said on Thursday. The gross domestic product (GDP) growth during the first quarter of last year hit 6.9 percent. In a press conference, Pernia admitted that the January to March gross domestic product was lower than the 6.5-7.5 percent GDP full year target. "Our first quarter performance bodes well for the economy as it is broadly in line with our target of 6.5-7.5 percent for this year. It is, however, lower than desiredly expected, and for this we were somewhat downcast because we were expecting something like around the midpoint of growth range 6.5-7.5 percent," he said. Pernia, also director general of the National Economic and Development Authority (NEDA), said the lower growth for the first quarter could be due to base effects. "That is, growth last year was high due to election spending, as you would already know by now, the impact of which has already dissipated," Pernia said. The Philippines held the national and local elections in May last year. Pernia also attributed slower growth on the "changing of the guards of the administration and reorientation of programs typically take some time to settle, and this slowed government spending for the quarter." By sector, services grew 6.8 percent in the first quarter, lower than last year’s 7.5 percent and industry recorded 6.1 percent growth from 9.3 percent in the first quarter of 2016. Agriculture, which declined by 4.3 percent in the first quarter last year rebounded to 4.9 percent this year. Pernia stressed that compared with other major emerging economies in Asia, the Philippines "remains one of the strongest performers." Manila has surpassed Vietnam and Indonesia, which both grew 5.1 percent in the first quarter, and Thailand, with 3.3 percent. But the Philippines was only second to China's 6.9 percent, while India has not yet released its data for the period. Despite lower-than-expected economic growth, Pernia said the government maintains its target for the year. But he did not discount the possibility the economic team, including him, might "revise upward" the target later. To ensure growth momentum, he said it is important to ensure that government spending for both consumption and investment remains within the fiscal program. He expects construction activities and public spending to pick up sharply, with the government's "Build, Build, Build" program, which involves construction of different infrastructure projects. But Pernia said the government remains on the lookout for external downside risks that may include market volatility from continuing United States' interest rate normalisation, geopolitical tensions in various regions, and the possible rise of protectionist sentiments especially in Western countries. He also warned on the potential effects of El Nino and to ensure that inflation would remain under control. Celerina Monte/DMS