Phl economy slows down to 6% in Q2

Philippine economic growth slowed to 6 percent in the second quarter of the year, as falling exports and the rising consumer prices continued to impact growth.

The government reported on Thursday the Philippines remains among Asia's best performing economies but behind Vietnam's 6.8 percent growth and China's 6.7 percent, and ahead of Indonesia’s 5.3 percent.

The Q2 gross domestic product (GDP) growth "is less than what we had hoped for," said socioeconomic planning chief Ernesto Pernia said in a statement yesterday. First quarter GDP was revised to 6.6 percent from 6.8 percent.

Sought for his comment on the latest economic data, Mandaue Chamber of Commerce and Industry vice president Steven Yu said he remains optimistic about growth prospects in the second half of 2018 despite the slowdown.

"Even at 6 percent Q2 growth, we are still the country with the second highest growth rate in Asia amidst the global landscape with an ongoing trade war. Yes, the growth has slowed but we are still optimistic that we are on sound financial footing," the business leader said.

He urged the government to prioritize bringing down inflation which has significantly affected consumers.

"We expect inflation to be reined in come second semester of the year. We expect the economic managers to give priority to measures taming inflation. We also expect exports to stabilize and grow," the MCCI official said.

"The outlook for the second semester is still positive. Interest rates are increasing and there are bumpy roads down the path but we believe that we will end the year still with some flying colors," he also pointed out.

Yu believes the continued growth in tourism and BPO industries as week as the infrastructure buildup will "provide the foundation for sustained respectable growth in the next three years."

GDP growth for the first six months averaged at 6.3 percent. This implies the economy would have to expand by at least 7.7 percent in the second semester to attain the low-end of the government's 7-8 percent 2018 target.

Pernia partly attributed the slowdown to policy decisions that are expected to promote sustainable and resilient development.

He cited the temporary closure of Boracay Island from April to October 2018, which partly made a dent on the economy with growth in exports of services slowing to 9.6 percent in the second quarter from 16.4 percent in first quarter. "We are also referring to regulations in the mining sector – the closure of several mining pits and the excise tax on non-metallic and metallic minerals – so that mining and quarrying sector showed a lackluster performance. It is down by 10.9 percent," he noted.

"But, I emphasize, all measures should ensure sustainable and long-run growth for the economy. These policy decisions were prudent and judicious," he added.

Industry growth is slower at 6.3 percent as manufacturing softened on the back of strict regulations of controlled chemical and chemical products, coupled with the high rates charged by shipping companies for transporting chemicals.

"We are also gravely concerned about the almost stagnant output of the agriculture sector and this supports our premise that the main reason behind the high inflation is the gross deficiency in the domestic production of food, which was not augmented by imported goods especially rice," Pernia pointed out.

The country's chief economist reiterated his call for the tariffication of rice imports.

"Rice tariffication is a crucial measure to address food supply issues and their consequent impact on inflation. It will reduce the policy uncertainty in rice trade, and hopefully, encourage more productive investments in the sector," he said.

Pernia believes inflation should moderate by the end of the year as the central bank has forecast. Consumer prices have risen for the past seven months of 2018, putting so much pressure on consumers.

"And despite the price pressures, domestic demand remained buoyant at 10.1 percent – driven by household consumption and investments. This is the silver lining," the NEDA chief noted.

"In the case of household consumption, higher disposable incomes resulting from the recently passed Tax Reform Package 1 and improved labor market conditions are seen to help sustain growth," he added.

Government consumption saw a slight dip at 11.9 percent from the 13.6 percent in the previous quarter.

However, government spending is expected to continue to grow as it works toward the development of human capital.

He also said the infrastructure buildup bodes well with the construction industry and is seen to boost not only public construction but private builders as well.