Philippine economy accelerates in Q4 but fails to hit 2019 target

MANILA, Philippines (Updated 11:56 a.m.) — The Philippine economy managed to grow faster in the final three months of 2019 despite headwinds, but it was not enough to meet the government’s growth target for the year.

Gross domestic product — or the value of all finished goods and services produced in the country — expanded 6.4% in the fourth quarter, quicker than the downwardly revised 6% in the preceding three months and the fastest rate since the 6.5% growth clocked in the first quarter.

In 2019, GDP growth averaged 5.9%, missing the government's 6%-6.5% goal for the year. The latest full-year print also snapped the seven-year above 6% growth streak and was the slowest pace since 2011’s 3.7%.

The economy slowed down in the first half of 2019 after the delayed approval of the national budget left new projects unfunded and disrupted state spending.

But the economy managed to rebound in the second half amid a sluggish recovery in government spending and robust household consumption fueled by lower interest rates.

Among the major economic sectors, services posted the fastest growth in the fourth quarter at 7.9%. But this was partly tempered by a deceleration in agriculture.

Consumer spending grew 5.6% in the October-December period while government consumption picked up 18.7%, data from the Philippine Statistics Authority showed.

Meanwhile, construction jumped 10.7% in the fourth quarter on the back of 34% growth in public construction that offset weak private construction.

At a press conference, Socioeconomic Planning Secretary Ernesto Pernia said that based on his “guesstimate”, growth last year could have hit as high as 7% had the 2019 budget been passed in time.

 “We have seen our economy facing several challenges even at the start of 2019 as the budget impasse led to delays in the implementation of government programs and projects,” Pernia said.

“We need to sustain our strong macroeconomic fundamentals to withstand external shocks and promote growth over the medium-term,” he added.

Commenting on the latest GDP data, Alex Holmes, Asia economist at Capital Economics, said that while recent monetary policy loosening should help support continued strong growth, it is unlikely that economy will continue to pick up speed.

“For one thing, the spike in government spending in Q4 will prove temporary, as distortions relating to the delayed 2019 budget fade,” Holmes said.

“With this year’s budget targeting an unchanged deficit of 3.2% of GDP, we don’t think government spending will provide much of a boost to growth in 2020,” he added.

Last month, the inter-agency Development Budget Coordination Committee, or DBCC, kept its 2020 economic growth target at 6.5%-7.5%.

But for 2021 until 2022, the DBCC said they are now targeting a GDP growth of 6.5%-7.5%, abandoning their original goal of 7%-8%. — with a report from BusinessWorld