Economy grows 6.2% in Q3, 2nd fastest in Asia

MANILA, Philippines — The economy grew at a faster pace in the third quarter as the government spent more for projects, the agriculture sector recovered and services remained a strong contributor, the National Economic and Development Authority (NEDA) said yesterday.

Economic growth – as measured by the gross domestic product (GDP) – accelerated to 6.2 percent, in line with market expectations.

This was faster compared to the 5.5 percent GDP growth in the second quarter and six percent in the third quarter of 2018. 

This brings the year-to-date average to 5.8 percent,  which is slightly below the lower end of the government’s full-year growth target of six to seven percent. 

This means the Philippine economy will have to expand by at least 6.7 percent in the last quarter of the year to meet the lower end of the growth target. 

“This is very achievable. We have seen the economy surging and the momentum will continue,” Socioeconomic Planning Secretary and NEDA chief Ernesto Pernia said in a briefing yesterday. 

The Department of Finance (DOF) expressed optimism that GDP growth this year may still hit at least six percent following the economy’s recovery in the third quarter.

In a statement, Finance Secretary Carlos Dominguez said he sees economic growth meeting the lower end of the  six to seven percent target for 2019 as the government continues to accelerate spending to meet its disbursement program.

Dominguez said state spending is expected to further speed up in the fourth quarter and in 2020 in light of two positive developments in Congress.

These include the likely passage of the 2020 budget before the end of the year, and the impending passage of a joint congressional measure extending  the validity of the 2019 budget by another year.

The Bangko Sentral ng Pilipinas (BSP) likewise said achieving a full-year GDP growth of six percent would be a challenge but still doable.

 “The six percent full year GDP growth target is a tall order, after a slower than expected first half, but still doable. In any event, the Philippines growth performance this year is one of the fastest among relatively large economies, amidst a slowing global economy,” BSP Governor Benjamin Diokno said.

He said the third quarter figure exceeded expectations, including BSP’s 5.8 percent to six percent forecast, indicating that the government’s spending catch-up plan is working.

Compared with regional economies that have already released their GDP figures, the Philippines ranks behind Vietnam’s 7.3 percent growth and ahead of China and India’s six percent, and Indonesia’s five percent expansion.

Pernia attributed the third quarter rebound mainly to stronger public spending during the period.  Government spending grew by 9.6 percent, still slower than the 14.3 percent pace in the same period last year but faster than the 5.6 percent rate in the second quarter this year. 

He noted that government spending was boosted by the rollout of more projects by the Department of Public Works and Highways (DPWH) in line with its catch-up plan for spending. 

“The stronger growth in public spending in the third quarter contributed significantly to our third quarter performance,” said Pernia. “The government is committed to speeding up the implementation of its programs and projects that were affected by the budget impasse and the election ban earlier this year.” 

Because of this, he said the timely passage of the 2020 national budget plays a crucial role in sustaining the momentum for government spending. 

“We also welcome the approved validity extension of the 2019 fiscal program,” he said. 

Alongside the slowdown in the growth of consumer prices, household consumption also rose by 5.9 percent in the third quarter, faster than the 5.6 percent in the second quarter and 5.3 percent in the third quarter of 2018. 

“For the remaining months of the year, the benign inflation outlook, and more upbeat consumer confidence, are expected to stimulate private consumption, especially with the nearing holiday season that has begun,” said Pernia.

“As we welcome the easing of inflation, we continuously monitor prevailing prices to ensure that they are reflective of current market situation. Ample supply of basic commodities should also be ensured to further boost domestic consumption,” he added. 

On the supply side of the economy, recovery was seen in the agriculture, hunting, forestry and fishing sector at 3.1 percent growth rate in the third quarter, reversing the 0.03 percent contraction in the third quarter of 2018. 

Steady growth of 6.9 percent was seen year-on-year in the industry sector in the third quarter of 2019. 

Slower growth of 5.6 percent, meanwhile, was seen in the industry sector in the third quarter of the year from six percent in the same period last year. 

The slower growth in industry reflects the 0.2 percent decline in imports during the period as the country imports most of the production requirements of industries. 

“In the near term, we expect the agriculture sector to gain momentum on the back of relatively favorable weather conditions. The El Niño-neutral situation is likely to continue and only fewer typhoons are expected to occur until April 2020,” said Pernia. 

He urged the Department of Agriculture and other concerned agencies to swiftly implement the programs and projects under the Rice Competitiveness Enhancement Fund and to enforce stricter biosecurity measures to counter the spread of African swine fever. 

Pernia said that while growth prospects remain optimistic for the fourth quarter, external risks related to the prevailing US-China trade war and slower growth in the global economy remain. 

“To withstand external shocks and promote growth over the medium term, our country must diversify products and markets through the establishment or improvement of new and existing trade relations with strategic partners,” he said. – with Mary Grace Padin