Q2 growth brings 2017 goal within reach

THE PHILIPPINE economy grew by 6.5% last quarter on the back of increased household and government spending, putting the lower end of the government’s full-year target within reach, the Philippine Statistics Authority reported yesterday.

The latest growth reading for gross domestic product (GDP) — the value of all finished goods and services produced in the country — marked the eighth consecutive quarter that the pace exceeded 6.0%.

The 6.5% turnout was up a notch from the first quarter’s 6.4%, but was slower than the year-ago 7.1% that benefited from an additional lift from expenditures related to the May 2016 general elections.

Second- quarter growth matched the 6.5% median estimate of economists in BusinessWorld’s poll last week, while the first half ’s 6.45% average compared to the government’s 6.5-7.5% full-year target range for 2017 and eased from 7.0% logged in 2016’s comparative six months.

“With our country growing by 6.5% in the second quarter of 2017, I am pleased to inform you that we remain one of the bestperforming economies in Asia,” Socioeconomic Planning Secretary Ernesto M. Pernia said in a briefing yesterday.

Mr. Pernia, who is directorgeneral of the National Economic and Development Authority (NEDA), said the Philippines is “either the second or third fastest- growing major Asian economy” next to China (6.9%), overtaking Vietnam (6.2%) and Indonesia (5.0%).

On the demand side, household consumption, which accounted for two- thirds of total expenditures in the economy, remained a key driver of growth, picking up to 5.9% from 5.8% in

the preceding quarter, though slower than the year-ago 7.5%.

Government spending accelerated to 7.1% from a near- flat 0.1% in the first quarter. This was, however, slower than the 13.5% notched a year earlier.

Private investment in the form of capital formation eased to 8.7% last quarter from JanuaryMarch’s 10.6% and from the past year’s 30.3%. The second-quarter pace was the slowest since the 5.1% recorded in 2014’s fourth quarter.

Total exports — both goods and services — grew 19.7%, slower than the first quarter’s 20.3% albeit faster than the year- ago 10.6%. Total imports, meanwhile, grew by 18.7%, slightly faster than the previous quarter’s 18.6% but lower than the past year’s 25.4%.

On the supply side, the industry sector grew the fastest among the three major sectors last quarter, gaining 7.3% that was nevertheless a deceleration from 7.6% in the past year. In this category, mining and quarrying lead the way with 13.7%, a reversal from the 18% and 4.0% declines posted in the first quarter and second quarter of 2016, respectively. Manufacturing followed suit as it picked up to 7.9%, faster than the readings in the first quarter ( 7.6%) and the same period last year ( 6.2%). Construction slowed down to 6.3% from last year’s 13.5%. Electricity, Gas and Water Supply’s 2.4% was also slower than the 10.3% the past year.

The services sector, which make up nearly 60% of the economy’s total output, grew by 6.1%, slower than the 8.2% in the 2016’s second quarter. Subsectors that grew above or matched the sector’s average were real estate, renting & business activities (7.9% from last year’s 8.8%); public administration & defense; compulsory social security (7.6% from 6.4%); trade and repair of motor vehicles, motorcycles, personal and household Goods (6.3% from 8.9%) as well as financial intermediation (6.1% from 6.9%).

Agriculture, hunting, forestry and fishing continued to help lift overall economic growth, expanding by 6.3% as the sector continued to recover from damage from a prolonged El Niñoinduced dry spell that lasted until 2016’s second quarter, picking up from the first quarter’s 4.9% and the year-ago 2.0% contraction.

Economists look to sustained growth in household spending, which has been the backbone of the Philippine economy for years.

“Strong private consumption has been boosted by continued expansion in overseas worker remittances, which rose by 6.8% year-on-year in June, as well as rapid growth in household credit,” said Rajiv Biswas, Asia Pacific chief economist at IHS Markit.

For Security Bank economist Angelo B. Taningco, growth was partly driven by higher outlays for infrastructure. “The surge in government spending was propelled by an upswing in government’s disbursements for infrastructure and capital outlays,” he said.

Some economists also took note of the slowdown in investments last quarter after the last two years’ double-digit pace.

Gundy Cahyadi, economist at DBS Group Research, said that while private consumption had beaten forecasts, “investment growth actually did slightly worse than our expectations.”

“Inventory drawdown has continued, and this indicates that normalization in investment numbers is likely to remain a dominant theme ahead,” he said, citing “upward risks” ahead.

Mr. Cahyadi cited the “strong showing ” of agriculture and manufacturing, noting that “[t]he manufacturing sector has continued to receive a boost from export demand, and this has proven to be a constant positive in recent years.”