DESPITE the disappointing second-quarter economic performance that saw GDP growth slowing to 4.3 percent, the full-year target “can still be met” if all sectors pull in weight and move quickly to recover lost ground, Sen. Imee Marcos and a private economist said Friday.
The Philippines, according to John Paolo Rivera, PhD, president and chief economist of Oikonomiya Advisory & Research Inc., can still attain its 2023 growth target of 6 percent despite the lower-than-expected growth from April to June.
“Kung kaya bang maabot ang government target na 6 percent—hindi naman natin sinasabing imposible kasi wala namang imposible, pero may mga kailangang gawin ang pamahalaan para ito ay maabot. [On whether we can still attain the government taregt of 6 percent—we are not saying its is impossible, because nothing is impossible, but the government must do something to reach it],” said Rivera in an open forum at the launch of his book at Rex Knowledge Center.
He traced that dismal second-quarter figure to the end of the “revenge spending” manifested a year after Covid-19 health protocols eased.
“Our economic slowdown today owes to the slowing consumption as savings of households are dwindling, coming from their revenge spending,” Rivera told BusinessMirror, speaking partly in Filipino.
For her part, Senator Marcos noted, in reaction to the Philippine Statistics Authority (PSA) report on Thursday: “The 4.3-percent Q2 GDP growth recorded as the slowest in two years, was affected mainly by: Inflation; the apparent dissipation of ‘revenge spending’ or lessening of consumer spending; and, agriculture output declining by 1.3 percent.”
All these factors, she stressed, “are important drivers of GDP growth,” and, therefore, the second-quarter data “must be seen as a challenge on what next steps should be taken so that the annual GDP target of 6-7 percent can still be met.”
So far, the senator noted: “for the entire first semester since January, GDP growth has already reached 5.3 percent.”
The work ahead
‘Let’s work on further improving the employment situation so that disposable incomes can increase,” Marcos said, stressing that “efforts in doubling-up agriculture output are warranted.”
This being the case, Senator Marcos reminded that “we all know that climate change today has the greatest impact on agriculture output.”
“It is thus very clear that adaptation and mitigation measures have to be taken,” the senator stressed, noting that “support services that will increase agriculture output have to be in place.”
Agriculture was again the laggard in among production sectors in the second-quarter growth data.
Based on the PSA data, the Agriculture, Fishery, and Forestry (AFF) posted a growth of 0.2 percent in the second quarter and contributed a mere 0.01 percentage points to GDP growth.
Economists both in government and the private sector earlier attributed the poor GDP data to a combination of factors: the absence of election-related spending, persistent inflation, the “lagged effects” of higher interest rates and lower-than-expected government spending.
“The lagged effects of the uptick in interest rates last year and this year, we are feeling that now, especially in investment and even in households purchases of durable goods—those can be felt now because people postponed their spending on durable goods,” Neda chief Arsenio Balisacan told reporters on Thursday, partly in Filipino.
Meanwhile, Rivera thinks the Bangko Sentral ng Pilipinas (BSP) is in a delicate balancing act on whether to continue to tighten interest rate to tame inflation, at the risk of further dampening growth.
“This is the tricky part for BSP. Because they raise the interest rate to control inflation. But in raising the interest rate, it also becomes the reason for a slowdown. So they must balance that,” Rivera explained, partly in Filipino.
Based on the data available to the public, the economist thinks it is better for the BSP to “pause” the interest rate.