Economic growth slows further in Q2

enablePagination: false
maxItemsPerPage: 10
totalITemsFound:
maxPaginationLinks: 10
maxPossiblePages:
startIndex:
endIndex:

(FILE PHOTO)

Metro Manila (CNN Philippines, August 8) — Economic growth lost steam during the second quarter, hitting the slowest pace in over four years, as the delayed budget continued to hold back the rollout of government projects.

The Philippine economy grew by 5.5 percent from April-June, the Philippine Statistics Authority (PSA) said on Thursday. This is weaker than the 5.6 percent expansion logged during the first three months of 2019 and the 6.2 percent performance posted during the second quarter of 2018.

The growth pace underwhelmed compared to the 5.9 percent median forecast from a CNN Philippines poll, and still missed the government's 6-7 percent goal.

'Challenging'

Secretary Ernesto Pernia of the National Economic and Development Authority (NEDA) said the economy faced "challenging times" during the quarter, pinning the blame on the El Niño phenomenon, global trade tensions, and infrastructure delays.

"This weak economic performance during the second quarter of 2019 is the continuing effect of the delay in the passage of the 2019 budget coupled with the election ban," Pernia said during a media briefing.

READ: Infrastructure spending misses first-half target by 21%

"The environment of a low inflation rate now, plus the timely passage of the 2019 budget would have made a lot of difference," Pernia added, noting that growth would have been at 6.5 percent last quarter if only the budget was passed on time. 

He is referring to the four-month delay in the passage of the national budget, which left new and continuing state programs unfunded. President Rodrigo Duterte signed the ₱3.7-trillion measure only last April 15. Pernia said government spending has slowed, as public construction contracted by 27.2 percent year-on-year.

This offset stronger private construction and spending activity, which picked up during the quarter.

The NEDA chief also called to fast-track infrastructure projects, saying that only 11 of 38 big-ticket proposals approved by the President are currently under construction. Economic managers were banking on the 75 projects in the "Build, Build, Build" pipeline to spur overall growth, but rollout remains hampered by the long wait for approvals.

"There is room for redoubling effort on spending on public infrastructure," Pernia added, noting that there is space to expedite the release of construction and other regulatory permits.

Overall government consumption eased to 6.9 percent from 11.9 percent last year, while household spending softened to 5.6 percent versus a 6 percent growth a year ago, according to PSA data.

By sector, services were the biggest driver of growth which expanded by 7.1 percent. This is followed by a 3.7 percent increase in industrial output which decelerated from 6.5 percent a year ago. Meanwhile, agriculture scraped a mere 0.6 percent growth. The Philippine Statistics earlier reported that farm output shrunk by 1.27 percent during the quarter due to fewer crop harvests, particularly of rice and corn, as the dry spell dried up irrigation canals and wilted plants.

In a separate press briefing, Presidential Spokesperson Salvador Panelo said Malacañang is not worried about the sluggish economic performance in the said period as economic managers said the slowdown was "temporary." He added that the government is looking for ways to perk up domestic activity.

Solutions

Pernia appealed to the newly-formed 18th Congress to finish talks on the 2020 budget within the year to avoid a repeat of this year's hiccups. He also wants to extend the validity of allocations under the 2019 budget to allow agencies to catch up with their delayed spending plans.

However, the Cabinet official noted that he's "almost certain" that the new set of lawmakers will really fast-track the budget deliberations as both chambers of the Legislative are composed of a super-majority of Duterte allies.

READ: House eyes passing 2020 budget by October

For now, Pernia said the economy needs to grow by at least 6.4 percent in the last six months to even hit 6 percent growth for the entire year. He admitted that the Cabinet may need to adjust the target to 6-6.5 percent be more realistic, following a 5.5 percent average pace during the first six months.

All eyes are now on the Bangko Sentral ng Pilipinas (BSP) as top monetary officials hold their rate-setting meeting on Thursday afternoon, with a reduction of benchmark interest rates seen to spur growth.

"With growth threatening to slide below 6 percent for the year and inflation in check, the BSP will need to consider walking back last year’s ultra-aggressive rate hike to help provide the economy a boost all the more with clear and present global headwinds darkening ahead," said ING Bank senior economist Nicholas Antonio Mapa.

Analysts polled by CNN Philippines last week expect the central bank to trim the key rates by 25 basis points, which would mean lower loan and credit card borrowing rates for banks down the road. However, some warn that the disappointing growth figure may trigger a stronger easing move from the BSP.