Economic prospects remain bright for the second half of 2023, despite the lower-than-expected growth in the first six months, as the government prepares to ramp up spending and consumers look forward to bigger celebration of the holiday season this year.
While the gross domestic product grew by only 4.3 percent in the second quarter, compared to 6.4 percent in the first quarter, the gross national income—a broader measure of the economy that includes income from abroad—still posted a robust expansion of 8.6 percent in the second quarter, following the 10-percent growth in the first period.
Compensation inflow from the rest of the world increased 87.6 percent year-on-year in the second quarter, according to the Philippine Statistics Authority.
Finance Secretary Benjamin Diokno, the head of the government’s economic team, is brimming with confidence that the lower end of the 2023 growth target range of 6 percent to 7 percent “remains achievable.” He said an aggressive catch-up plan would do the trick for the second half of the year.
Data show that government spending fell 7.1 percent in the second quarter, following a 6.2-percent growth in the first. Diokno believes that boosting public spending in the coming months would help lift growth.
“[The] 6.0 percent GDP growth target for 2023 remains achievable… An aggressive catch [up] plan for infrastructure projects [roads, bridges, airports, seaports, power, water, irrigation, telecommunications facilities, digitalization, school buildings, housing and others], quicker response by GOCCs [government-owned and -controlled corporations] and strong and deliberate spending by resource-surplus local governments are essential parts of the solution to the relatively weak second-quarter growth performance of the Philippine economy,” Diokno said.
He said one of the advantages of the Philippine economy is its less dependence on exports, and its growth for the past several years was mainly consumption-based.
The Philippine economy is less susceptible to the weaker exports demand amid the slowing global economy, which is partly due to the aggressive monetary tightening, supply bottlenecks and rising commodity prices resulting from the Russian invasion of Ukraine, he said.
ASEAN performance
Diokno said a closer look at the economic performance of other Asian economies could give a balanced view of the Philippines economic performance.
Data show that in the first and second quarters, Singapore grew by 0.4 percent and 0.7 percent, respectively; South Korea, 0.9 percent and 0.87 percent; Hong Kong, 2.9 percent and 1.5 percent; Taiwan, 2.9 percent and 1.5 percent; Vietnam, 3.3 percent and 4.14 percent; and Indonesia by 5.04 percent and 5.17 percent.
The Philippines grew by 6.4 percent in the first quarter and 4.3 percent in the second, bringing the average in the first half to 5.3 percent. Although lower than the target range, it was still the fastest in the region.
Diokno said in Vietnam, manufacturing shrank by 7.3 percent year-on-year. While the United States accounted for 29.4 percent of Vietnam’s export market, merchandise exports to the US fell 21.3 percent year-on-year in the first five months of 2023. Similarly, exports to the European Union shrank 9.7 percent in the five-month period, while exports to mainland China declined 6.7 percent.
He said Indonesia’s strong showing in the second quarter was due to strong consumption during the Muslim and school holiday periods and significant government spending of 10.62 percent growth year-on-year.
By contrast, government final consumption expenditure in the Philippines contracted 7.1 percent, while gross capital formation was flat at – 0.04 percent year-on-year.
The PSA said the agriculture, forestry, and fishing; industry; and services sectors posted positive growths in the second quarter of 2023, with 0.2 percent, 2.1 percent, and 6.0 percent, respectively.
“The Philippine economy has to grow by 6.6 percent in the second half of the year to achieve the lower end of the 6 to 7 percent growth target for 2023. While there are formidable external challenges, the prospect for achieving this lofty goal is largely in the hands of the current administration,” Diokno said.
The interagency Development Budget Coordinating Committee in June kept the 2023 target range as well as its growth assumption of 6.5 percent to 8 percent for 2024 to 2028.
The economy grew by a 46-year high of 7.6 percent in 2022 on the reopening of the economy to greater normalcy.