Q2 growth accelerates

The Philippines’ economic growth accelerated in the second quarter of the year on the back of higher government spending amid high inflation and low household consumption due to rising interest rates.

Data from the Philippine Statistics Authority (PSA) released on Thursday showed the country’s gross domestic product (GDP), or the total value of goods and services produced in a period, rose to 6.3 percent during the April to June period.

The latest figure exceeded the 5.8-percent revised GDP increase rate for the first quarter this year and the 4.3-percent GDP growth rate in the first quarter of 2023.

The latest GDP print keeps the government’s 6-percent to 7-percent growth target for this year on track.

Among the elements that contributed to the total GDP numbers, government spending increased 10.7 percent year-on-year due to ambitious infrastructure projects, defense equipment upgrades, and preparations for the next midterm polls.

In a press briefing, PSA Chief and National Statistician Dennis Mapa said the largest influence on economic growth came from the construction sector at 16.1 percent.

Depressed households

Financial and insurance activities came in second at 8.2 percent, followed by the industry sector at 7.7 percent, services at 6.8 percent, and wholesale and retail trade at 5.8 percent.

The agriculture, forestry, and fishing sector, meanwhile, experienced a year-on-year decline of 2.3 percent.

Mapa said household expenditure — which comprised 70 percent to 80 percent of GDP — only grew 4 percent year-on-year in the second quarter.

Government spending also increased by 10.7 percent, followed by gross capital formation by 11.5 percent, exports of goods and services by 4.2 percent, and imports of goods and services by 5.2 percent.

The gross national income increased by 7.9 percent, while net primary income from the rest of the world rose by 24.7 percent.

In the same press briefing, National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan announced the Philippines was among Asia’s top performers with the latest GDP rate.

“This performance gives our position as one of Asia’s best-performing major emerging economies. For East Asia’s economies that have released their second quarter 2024 GDP growth rates, we follow behind Vietnam at 6.9 percent, while leading Malaysia at 5.8 percent, Indonesia at 5 percent, and China at 4.7 percent,” Balisacan said.

However, Balisacan told reporters on the sidelines of the briefing that household expenditure during the period was “anemic,” despite the fastest quarterly growth rate in the past five quarters.

Not as strong

He said “growth was not as strong as one would expect” since consumers felt the delayed effects from the interest rate increases and high inflation.

Balisacan said that last year’s GDP growth would have been half a point higher this time had it not been for the elevated costs.

“While these numbers are encouraging, our growth performance could have been even more impactful on all Filipinos if not for the high inflation and interest rates that the country experienced,” he said.

While economic growth helps millions of people escape poverty, Balisacan acknowledged that even rapid growth will not instantly affect a person’s ability to make ends meet.

He said that Filipinos might only experience a 4.5-percent gain in GDP if the growth were “uniformly shared” among them.

“Think about that, a 4.5-percent increase in your income. Will you be able to buy a condo at that increase right away? Will you even be able to buy a new laptop or new cellphone with that increase?” he said.

“You need to sustain. But if that growth can be sustained for the next couple of years, then you’ll likely be able to do so,” he added.

The country’s inflation rate quickened to 4.4 percent just a few days before the PSA released the GDP number, breaking the government’s goal range for the first time in eight months.

According to the results of the most recent PSA Labor Force Survey, the unemployment rate in June decreased to 3.1 percent, which was the second lowest level in almost 20 years.