The economy is still expanding, albeit slower and no thanks to the agriculture sector. The gross domestic product in the third quarter of the year grew 6.1 percent, slower than the adjusted 6.2-percent expansion in the second quarter and 7.2 percent year-on-year.
Economic Planning Secretary Ernesto Pernia blamed the sluggish output in the agricultural sector and a decline in household consumption because of higher inflation for the tepid growth in the third quarter of 2018.
The trade, construction, and manufacturing sectors, according to the official data, were the main drivers of growth for the period. Among the major economic sectors, services registered the fastest growth of 6.9 percent, followed by industry which expanded 6.2 percent. Agriculture production, in contrast, declined 0.4 percent.
Agriculture has emerged as the weakest link in the GDP, with the highly regulated trading regime and weather disturbances dampening the sector’s output. Pernia has urged Congress to pass without delay the Rice Tariffication Bill to reduce the price of the commodity by P2 to P7 per kilo and help enhance the productivity of farmers through revenues (from duties) to be given to them to improve their performance.
The short supply of rice and lack of importations have contributed greatly to a sharp increase in the inflation rate starting in the second quarter of the year. Higher prices, in turn, dampened the consumption of other products.
Pernia has expressed concern on the marked slowdown in household spending on food and other basic products. The 5.2-percent expansion in household consumption in the third quarter was the slowest since the 5 percent recorded in the third quarter of 2014.
A slower household spending could foreshadow further slower economic growth. Less demand, among others, will prompt companies to defer their expansion plans and reduce employment opportunities.
Authorities, thus, must quickly address rising inflation to preserve the earlier gains in the economy. Pernia has conceded that the GDP growth would have been between 6.5 percent and 7 percent if not for the faster inflation rate that hit 6.7 percent in September.