Philippines economy slows to 6.1% in Q3

CEBU, Philippines — Economic growth in the Philippines slowed to 6.1% in the third quarter due to weaker consumption and consumer confidence, and decline in agriculture output.

Gross domestic product (GDP) growth last quarter was lower than 6.2% in the second quarter and below the 6.3% market expectations.

When asked for comment yesterday, Cebuano economist Fernando Fajardo, professor at the University of San Carlos, said it now seems impossible to hit the government's original 7% target for 2018.

"It will take a heroic 9.1% GDP growth in the 4th quarter for the government to achieve its original 7% GDP growth target for the year," Fajardo told The FREEMAN.

"That is not possible with inflation still high and given the uncertainties of global trade as affected by the US-China trade war and volatility of the global oil price," he pointed out.

The economics professor projected that growth "might in fact dip below the 6% territory in the 4th quarter or stay close to it."

Agriculture declined 0.4 percent in the third quarter, the first contraction since the fourth quarter of 2016. Services grew 6.9 percent while industry expanded 6.2 percent, data released Thursday showed.

Services contributed 4.1 points to the third quarter GDP print, industry accounted for 2.1 points while agriculture added 0.3 point.

The Philippines need to grow at least 7% in the last quarter to hit the low-end of the government’s 6.5-6.9% target for 2018.

To boost the economy, he said the government can do nothing much except to spend more which it had been doing in the first three quarters household consumption has been affected by the TRAIN law-induced inflation.

"Besides the slowdown in household consumption, fast rising imports in excess of exports is also bringing down GDP growth," Fajardo said.

"But government spending more than before would also mean more government deficits and inflation too," he also noted.

The Philippines is battling surging prices and a weakening currency.

In a statement yesterday, economic planning chief Ernesto Pernia said he was concerned about the slowdown in household consumption on food and other basic products.

"And that is exactly why the government has swiftly moved to boost consumer confidence and tame inflation," Pernia said. "With the measures we have been pushing for, the slowdown in household spending is deemed to be abatable and temporary."

Inflation in October remained high at 6.7% at its fastest pace in almost a decade, boosted by costlier fuel and utility costs.   This was the first time consumer price growth steadied this year despite expectations that inflation was easing.

The Bangko Sentral ng Pilipinas has raised interest rates at its last four consecutive meetings by a total of 150 basis points, bringing its benchmark rate to 4.5 percent as it moves to fight inflation.

The government has suspended the implementation of the second tranche of fuel excise taxes under the Tax Reform for Acceleration and Inclusion (TRAIN), originally scheduled next year, to keep inflation in check, the Department of Finance (DOF) had said.

The consumer price spike started at the beginning of the year following tax increases on fuel, sugary drinks and cigarettes.

However, the price increases swiftly moved to rice, the nation’s staple food, due to supply shortages.

On top of that, a more than 8% slump in the currency this year is adding to the inflationary pressure.

The country imports almost all of its oil, alongside food products like rice and corn.  The government has implemented measures to tame inflation such as importing more rice to stabilize prices.