ACCORDING to official data released on May 29, a succession of natural disasters (The 7.1-magnitude earthquake in Bohol and Super Typhoon Haiyan in 2013) has slowed down growth of the Philippine economy in the first quarter — uprooting it from its position as best performing economy in Asia.
With gross domestic product (January-March) at 5.7 percent (it was at 7.7 percent in Q1 of 2013), the Philippines has slipped into third place. China is at 7.4 percent growth, while Malaysia is at 6.2 percent.
“The relatively slow growth is expected given the magnitude of the destruction,” said Economic Planning Secretary Arsenio Balisacan, emphasizing on damage done to the agriculture, trade and tourism sectors.
According to Presidential Communications Operations Office Secretary Herminio Coloma Jr., faster rehabilitation of areas hit by Yolanda can help the economy regain its momentum.
Meanwhile, Budget Secretary Florencio Abad surmised that corruption scandals may have impeded government efforts for growth as well.
“The agriculture sector grew by only 0.9 percent in the first quarter of 2014, a far cry from the 3.2 percent recorded in the same period in 2013. The sector posted the same growth in the last quarter of 2013. Industry slowed to 5.5 percent this year, versus 7.6 percent in the last quarter, and 11.3 percent in the first quarter of 2013,” Philstar.com reported, adding that “only the services sector showed consistent growth, at 6.8 percent in the first quarter as against the 6.5 percent in the same period last year and 6.7 percent in the last quarter of 2013.”
“We were expecting, like so many observers, we would hit the range of 6.5-7.5 if things were not so bad in the disruption of the supply chain,” Balisacan said.
According to Balisacan (who is also director general of the National Economic and Development Authority/NEDA), slower growth is also attributed to lending restrictions imposed by the Bangko Sentral ng Pilipinas (BSP) and has affected private construction.
However, Balisacan notes that the first quarter result is still better, compared to other Asian countries (except for China and Malaysia.)
Finance Secretary Cesar Purisima chooses to remain optimistic.
“On the fiscal side, government expenditures have increased by 12 percent over the same period last year, supported by strong growth in revenue collections of nine percent in the same period, with particularly strong performance in the Bureau of Customs registering 26 percent year-on-year growth for the first quarter,” Purisima said.
“Strong collections result from the good governance reforms of Pres. Aquino, building upon the virtuous cycle of fiscal space for productive investments that will further enhance economic growth and social development in the country,” he added.
BSP Governor Amando Tetangco, Jr. echoes the same optimism.
“Prudential measures put in place by the BSP are for the purpose of helping to ensure that the growth in vital sectors of the economy, including real estate, are healthy and sustainable over the longer run,” Tetangco said.
“We will continue to watch global/domestic developments, refine monetary policy settings, and deploy macro-prudential rules, as appropriate, to keep liquidity and credit growth rates at levels that will continue to support sustained economic growth in a low and stable inflationary environment,” he said.
In terms of inflation, Tetangco emphasized that it is expected to remain within 3-5 percent this year, and within the 2-4 percent target in 2015.
“Inflation is seen to be manageable over the policy horizon, even as the inflation path has somewhat moved higher,” Tetangco said.
“We will not hesitate to act preemptively if we believe the inflation target is at risk. We are not wedded to a pre-set course of action. We will use available tools in our enhanced tool kit, as appropriate,” Tetangco further added.
ING Bank economist Joey Cuyegkeng attributes this slow GDP growth to the government’s conservative spending.
“One disappointment is government consumption which posted a measly two percent year-on-year growth in 1Q 2014. We were expecting a more robust growth since the monthly fiscal balance reports of government pointed to higher spending,” he said.
Additionally, problems with rehabilitation efforts for disaster-affected areas may have also affected government consumption.
Among suggestions to improve the country’s GDP, which were raised by economists and experts include: easing traffic congestion in Manila’s ports by removing the city government’s daytime truck ban to allow faster trade; fast-tracking and completion of reconstruction efforts in disaster-stricken areas.
According to Coloma, the Aquino administration will continue to work with the strategies in the updated Philippine Development Plan to increase job creation.
“To further boost employment, the Department of Labor and Employment will focus on implementing job creation facilitation programs targeted at businesses that are expanding operations,” Coloma said.
“The government will focus on increasing investments from employers to generate high quality and remunerative employment, as this is vital in achieving rapid poverty reduction towards inclusive growth,” he added.
Abad believes that without the government’s focused investments on infrastructure and capital outlay, GDP growth on the first quarter would have contracted further, adding that the Philippines has managed to preserve its status as one of Asia’s fastest-growing economies, “despite the volatility of the global market.”
“Ours is a position of studied optimism, where we have a full appreciation of the economic risks in our purview, as well as of the country’s immense potential for robust development in the next three quarters,” Abad said.
While a slowdown in economic growth may seem like a setback for the country, one should take into consideration the factors involved.
After all, going through crippling natural disasters, like a 7.1 magnitude earthquake and phenomenal Super Typhoon Haiyan is not an easy feat for any developing country.
These are variables that we have no control over. The best we can do, at this point, is to work on what we can control — factors governed by laws, such as government spending and curtailing corruption.
The task may seem simple, but is actually far from it.
(AJPress)