Local output growth measured as the gross domestic product (GDP) proved a disappointment in the second quarter at only 6 percent, Socioeconomic Planning Secretary Ernesto Pernia said on Thursday.
The lower-than-expected outcome snapped 10 consecutive quarters of expansion averaging at least 6.5 percent and highlighted the role played by inflation and its corrosive impact on consumer spending and investments as growth drivers.
Pernia said headline inflation, already high in the first quarter, had a “similar effect” on output growth as in the second quarter and flagged its growth as a “spoiler.”
The latest figure was the lowest quarterly growth in three years and lower than government’s target of between seven and eight percent. It also missed forecast by economists of a 6.7 percent GDP growth for the period.
“The growth is less than what we have hoped for,” Pernia said at the news briefing.
“To be fair and to put things in the proper context, the slowdown is partly due to policy decisions undertaken that are expected to promote sustainable and resilient development,” he quickly added.
With six-month growth averaging only 6.3 percent, Pernia said the $314 billion Philippine economy needs to expand by 7.7 percent in the second half to meet the low end of the seven to eight percent aspiration for the year.
We will have to double our efforts in terms of encouraging the sectors to be more productive and efficient in their activities.
While Pernia acknowledged that the Philippines is still among the fastest-growing economies in Asia, behind Vietnam’s 6.8 percent and China’s 6.7 percent, he voiced concern over stagnating agriculture sector growth and suggested that crop diversification be implemented and that government should encourage farmers to shift to high-value crops.
Agriculture accounts for more or less 13 percent of aggregate output but its components, like rice, are some of the largest and most influential inflation drivers of the consumer price index.
Dr. Lisa Grace Bernales of the PSA explained that the services sector recorded the fastest growth from previous of 3.8 percentage points, followed by industry with 2.2 percentage points and agriculture with 0.01 percentage points.
The latest figure was the lowest quarterly growth in three years and lower than government’s target of between 7 and 8 percent.
Joey Cuyegkeng, senior economist at ING Bank in Manila, similarly noted the disappointing 2Q performance which proved much lower than forecast.
“But there is also a silver lining. Domestic demand remains quite strong with household and business spending rising 5.6 percent and 20.7 percent year-on-year in 2Q while government spending growth is a still a strong 11 percent. The strong domestic demand is also reflected in strong service and industry sector growth of 6.6 percent and 6.3 percent YoY. High inflation could have dampened household spending,” he said.