"It was not the only negative factor at work; there were others."
"It was not the only negative factor at work; there were others."
The recent PSA (Philippine Statistics Authority) announcement of the first-quarter 2019 performance of the Philippine economy is bound to have come as a big disappointment to all the people, within and outside the government, who had become accustomed to seeing the economy post above-6-percent annual growth rate on a regular basis. The PSA announcement stated that the economy grew at a 5.6-percent rate in the March quarter. The GDP (gross domestic product) grew by 6.3 percent in the fourth quarter of 2018, bringing the full-year GDP growth to 6.2 percent. PSA noted that 5.6 percent was the lowest quarterly growth rate posted by the economy since the first quarter of 2015, when it grew by 5.1 percent.
The first-quarter 2019 GDP growth rate is below the government’s vaunted 6 to 8 percent annual-growth target. Just when the economic managers and private-sector analysts thought that above-6-percent growth had become the norm, the first-quarter 2019 dip happened.
When the two chambers of Congress were debating, during the last months of 2018, the GAA (General Appropriations Act) of 2019, the stage was already being set for pointing to the GAA’s delayed approval—and the probable re-enactment of the 2018 GAA—as the cause of any deterioration that might take place in the economy’s 2019 performance. Congress’ failure to produce a GAA before year-end would lead to the use of a re-enacted budget, the economic managers began saying, and the resulting reduction in the government’s spending authority was bound to cause an economic slowdown for as long as the 2019 GAA remained unapproved.
And so it came to pass. It was not until the beginning of the second quarter—toward the end of April—that Congress sent the P3.7 trillion GAA to Malacañang for President Duterte’s signature, and shortly thereafter PSA announced the economy’s performance in the year’s first quarter.
It all seems a “case closed” situation: the economy performed less robustly because the budget’s delayed approval caused the government to operate without the planned spending-authority increases. But is it really a “case closed” situation? Was the use of a re-enacted budget the one and only cause of the economy’s decline to below-6-percent growth in the first quarter?
I don’t think so. I have difficulty accepting the premise that the delay in the approval of the 2019 GAA—and the consequent resort to re-enactment of the preceding year’s budget—inevitably led to reduced GDP growth in this year’s first months. The premise is too simplistic to be acceptable; it is so easy to place the blame at the door of the delay in the 2019 GAA’s approval.
The fact of the matter is that other factors of a growth-restraining nature were at work in the Philippine economy during this year’s first quarter. Take, for instance, the performances of two of the economy’s largest productive components, agriculture and manufacturing. The dismal 2018 performance of agriculture—the sector accounts for approximately 20 percent of the GDP—apparently carried over into the first quarter of 2019. And only recently did the Director-General of NEDA (National Economic and Development Authority) publicly air his concern about what he called the continuing decline of the manufacturing sector.
Additionally, the growth of consumption was tempered by the anxiety and feeling of insecurity left behind by last year’s TRAIN-generated inflationary surge. Consumption accounts for around two-thirds of this country’s GDP.
Finally, the continued decline of the export sector—the source of the largest merchandise trade deficit in this country’s history—will have given rise to significant decreases in production and income across the economy.
Summing up, the delay in the approval of the 2019 budget was a factor in the below-expectations performance of the Philippine economy in the first quarter of this year. It was not the only negative factor at work; there were others. But it was the convenient scapegoat.