Boracay closure, mining regulations dampen economic growth

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FILE | The country will sustain its robust economic growth in the next few years on the back of the government's infrastructure program, according to international credit rating agency Moody's Investor Services.

Metro Manila (CNN Philippines, August 9) — The six-month closure of Boracay island, stricter regulations on the mining sector and a stagnant agriculture sector brought Philippine economic growth down to a fresh three-year low.

The Philippine economy grew by 6 percent in the second quarter of 2018, the Philippine Statistics Authority announced Thursday. The PSA likewise revised its estimate of last quarter's GDP from 6.8 percent to 6.6 percent on Wednesday.

The last time GDP was at 6 percent was during the third quarter of 2015. The growth rate has been faster since that period.

This GDP also falls short of the government target of 7 to 8 percent, the ideal growth rate in which the economic improvements would be felt by even the poorest of the poor.

Socioeconomic Planning Secretary Ernesto Pernia said the slowdown is partly because of policy decisions undertaken by the government, which are expected to promote sustainable development. This includes the closure of popular tourist destination Boracay for rehabilitation.

"We are referring to the temporary closure of Boracay Island from April to October 2018, which partly made a dent on the economy with growth in exports of services slowing to 9.6 percent in the second quarter from 16.4% in first quarter," Pernia said in a media briefing.

Pernia also noted the stricter regulations imposed on the mining and aquaculture sectors, which made a dent in their productivity.

"We are also referring to regulations in the mining sector - the closure of several mining pits and the excise tax on non-metallic and metallic minerals - so that mining and quarrying sector showed a lackluster performance. It is down by 10.9 percent," Pernia said.

He reiterated that the continued poor development in the agriculture sector remains a concern.

"Today's data on agriculture output strengthens the case for the government, particularly the Department of Agriculture, to urgently conduct a comprehensive review and reform of policies and programs that restrict access to land and the use of land, access to technology and extension services, access to finance, and access to markets," he added.

Nevertheless, the Socioeconomic Planning Secretary said that the government continues to be committed in setting policies that would promote inclusive growth that can be felt by all Filipinos.

Presidential Spokesperson Harry Roque said the President will not apologize for closing Boracay, despite its impact on economic growth.

"We think the closure of Boracay was justified. I don't think we should approach Boracay purely from a financial and economic point of view," he said in a media briefing.

Roque added that protecting the environment takes precedence over meeting economic growth targets.

"If GDP will further fall because of the desire for the President to protect the environment, so be it. We are investing in the future and not just the present," Roque said.

The slow growth in exports of the services sector to 9.6 percent in the second quarter from 16.4 percent in first quarter of 2018 was also a factor that brought down GDP performance.

On the other hand, Japan-based think tank Nomura Global Markets sees a bright spot in the Philippines' construction sector.

"The construction sector was a bright spot, posting an acceleration to double-digit growth in line with faster public sector expenditure disbursements on infrastructure and capital outlays," Nomura said in a statement.

Nomura expects growth to pick up by the second half of the year.

Despite this, the Philippine economy remains the third-fastest growing economy in Asia, behind Vietnam's 6.8 percent and China's 6.6 percent.

The Philippine Stock Exchange index lost 0.39 percent or 30.75 points and closed at 7,820.71, with investors disappointed by the GDP announcement.

CNN Philippines' correspondent Rex Remitio, digital producers Luchi de Guzman and Robert Vergara contributed to this story.