ECONOMIC growth slowed down to 6.4 percent in the first quarter, the slowest rate in five quarters as government spending turned weak following last year’s robust construction activities in the run-up to the May presidential elections.
Gross domestic product, or the total value of goods produced and services provided, grew slower than the 6.8 percent recorded a year ago, and the 6.6-percent increase in the fourth quarter of 2016, data from the Philippine Statistics Authority showed.
National Economic and Development Authority director-general Ernesto Pernia said in news briefing that despite the slower growth, the Philippines remained one of the strongest performers among the major emerging economies in Asia.
“For the first quarter, we overtook Vietnam and Indonesia, which grew by only 5.1 percent, and Thailand by only 3.3 percent. We are only second to China’s growth of 6.9 percent while India’s number hasn’t come out yet,” Pernia said.
Finance Secretary Carlos Dominguez III said the Philippines remained on track to meet its full-year growth target of 6.5 percent to 7.5 percent.
“GDP expansion in the year’s first three months illustrates that growth remains steady and could gain momentum for the rest of the year, partly as a result of this administration’s ‘Dutertenomics’ strategy to stimulate economic activity and achieve financial inclusion for all Filipinos in the long haul via an aggressive expenditure program on infrastructure, human capital formation and social protection,” Dominguez said.
Pernia said the government was expecting first quarter growth to fall between 6.5 percent and 7.5 percent.
“This can be explained by the base effects: That is, growth last year was high due to election spending, as you would already know by now, the impact of which has already dissipated,” Pernia said.
Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said the growth outlook remained strong, even as the first-quarter output was slower than market anticipated.
Among the major economic sectors, services had the fastest growth of 6.8 percent. Industry growth decelerated to 6.1 percent from 9.3 percent in the first quarter of 2016. Agriculture recovered with 4.9-percent growth from a decline of 4.3 percent in the previous year.
Pernia said the “changing of the guard of the government” and reorientation of programs really took time to settle, slowing government spending for the quarter.
“Note, however, that this was better than during the previous administration where government consumption spending and public construction contracted by about 15 percent and 37 percent, respectively. Of course, this could also mean that we have benefitted from reforms that have been put in place by the previous administration,” Pernia said.
He said on the demand or expenditure side, the economy remained strong, even with the slowdown in household spending and capital formation. With improving global demand, he said growth in exports was robust.
Exports of goods grew 22.3 percent, the fastest since the third quarter of 2010, and exports of services grew steadily by 14.3 percent in the first quarter of the year.
“Moving forward, the domestic economy is poised to maintain its growth momentum with the recovery of external trade and private sector’s steadfast optimism. The government has also been busy laying down a strong foundation for sustainable and equitable growth with an ambitious infrastructure program, among the many reforms and programs contained in the Philippine Development Plan 2017-2022″•[among which] are infrastructure spending and as well as other government programs, including investment in human capital,” Pernia said.
ING Bank Asia chief economist Tim Condon said the slower first-quarter GDP could prompt a reassessment of the monetary path, where the consensus was forecasting two 25 basis point rate hikes to 3.50 percent in the second half of 2017.
“With inflation evidently well-anchored, the BSP could entertain a prolonged period of steady policy settings,” Condon said in a statement.
ING Bank Manila senior economist Joey Cuyegkeng said the momentum for private sector activity would likely continue for the rest of the year but negative base effects would continue in the second quarter. Cuyegkeng predicted that government spending would recover in the second half.
“Economic activity for the full year 2017 could easily achieve the lower end of government’s target range of 6.5 to 7.5 percent. We are reviewing our full-year forecast of 6.3 percent for a possible upward revision,” Cuyegkeng said.
The Asian Development Bank earlier kept its growth estimate for the Philippines this year at 6.4 percent, driven by private and public investments. But it was expecting GDP growth to accelerate to 6.6 percent in 2018.