GNP grows by 5.6% in Q1


By Rose de la Cruz


The Philippine economy grew by 5.6 percent in the first quarter of 2019, the slowest recorded in 16 quarters since the first quarter 2015’s growth of 5.1 percent.


In a statement during the press conference of the National Economic and Development Authority today, Socioeconomic Planning Secretary Ernesto Pernia said the growth slowed down due to the re-enacted budget. It should have grown by 6.6 percent had the government operated on a 2019 fiscal program.


Comparing the 2018 and 2019 performance of the government sector, we see that government final consumption expenditure weakened, growing only by 7.4 percent versus 13.6 percent in 2018; public construction contracted by 8.6 percent, Pernia said. 


For instance, the Department of the Interior and Local Government’s construction of police stations and purchase of new equipment and the Department of Education’s repair and rehabilitation of school buildings were severely hampered, he added.


To reach the full-year growth target of 6-to-7 percent, the economy will need to expand by an average of 6.1 percent over the next three quarters, which is achievable given the current performance of the private sector and if the government sector is able to jumpstart and speed up the implementation of its new programs and projects.


On the supply side, both industry and agriculture sectors posted slower growth.




El Nino caused the agriculture sector’s slower growth, which is projected to continue until August of this year. With this, the Department of Agriculture should extend its production support programs to adapt to a protracted El Nino occurrence.  There is also a need for a more robust El Niño Mitigation and Adaptation Plan to address water, food, and energy security, as well as health and public safety in a more sustained manner.  The longer- term solution is to build the resiliency of the sector, which will require changes in production and processing patterns and practices of the agriculture sector.


Over the short term, a major structural change in the sector is the Rice Liberalization Act.  The Rice Industry Roadmap will need to be finalized, making sure that the impact of climate change is fully considered.  The different agencies that will receive funding from the Rice Competitiveness Enhancement Fund should already finalize their programs and workplans for immediate roll-out with the release of the budget.


Private construction


Private construction also slowed down, which is expected given the business cycle of the sector. But if we can quickly implement the reforms that reduce the cost of doing business, then the uptick in private construction may happen even sooner, he said.


Amendments to the Foreign Investment Act, the Public Service Act and the Retail Trade Liberalization Act will also encourage investments in industry and services and boost private construction as there will be greater need for factories and office spaces. Fortunately, foreign investments will also be encouraged with our country’s international credit rating upgrade to BBB+, historically the highest for the country.


On the demand side, household spending accelerated at 6.3 percent growth. We expect this to remain robust with a more upbeat consumer sentiment over the quarters ahead and the continued moderation in inflation, Pernia said.


As we have already mentioned, the delay in the approval of the 2019 budget has weakened down domestic demand.  What is needed is for government to quickly implement and disburse the fiscal program as indicated in the 2019 GAA.


To prevent any further delays, the Department of Budget and Management needs to issue the Budget Circular for the General Appropriations Act as soon as possible. While we support the implementation of the cash-based budget system, the supervening circumstances—such as the delayed budget and the election season—warrants an urgent review of the cash-based budgeting rules. If the payment period and budget validity are not extended, government agencies may decide to forgo implementing new programs and projects that are expected to take longer than seven months to complete, inclusive of the procurement process.


External headwinds


Today, we are commencing the mid-term update of the Philippine Development Plan 2017-2022. There is much to be done to counter external headwinds to reach our medium-term and long-term goals. Amid distractions, we call on our partners, especially the whole government, to remain focused on our commitment to making growth inclusive and self-sustaining over the long run, Penia stressed.  


We hope to have the continued support of everyone, including you our friends in the media, in our effort to translate this growth into what we have been referring to as matatag, maginhawa at panatag na buhay para sa lahat.



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