The Finance Department said Tuesday achieving the economic growth target of 7 percent to 8 percent this year remains possible as long as the government works harder.
Finance Undersecretary Gil Beltran, who also serves as the department’s chief economist, said a 30-percent to 40-percent increase in capital formation in the third and fourth quarters would put the economy on track to hit the target.
“We need a growth rate of 7.7 percent to be able to achieve 7 percent [the lower limit of the target range], and we achieved that before… It’s not new. When was that… in 2013 and before that we also achieved it under the GMA administration,” Beltran said.
“So it’s not new… We have to push capital formation further because during those years that we achieved 7.7-percent, 7.8-percent growth, we had a 30- to 40-percent increase in capital outlays, capital formation. Right now we are about 20 percent, so we will need to work harder,” Beltran said.
He said while the growth rate in the first semester looked disappointing, there was a “silver lining” in the growth performance and one of that was capital formation.
“It’s more than 20 percent and because of that, we believe that in the future quarters we will be able to perform better because once the factories and the machines that were purchased in the second quarter will be operational, we expect that the growth will accelerate in the future quarters,” Beltran said.
Beltran also downplayed the impact of inflation on economic growth, saying what was affected was only the consumer spending. He said consumer spending growth softened by 0.1 percent to 5.6 percent in the second quarter from around 5.7 percent in the first quarter.
The Philippine Statistics Authority reported last week that the gross domestic product growth slowed to 6 percent in the second quarter from a revised 6.6 percent in the first quarter and 6.7 percent a year ago.
Economists linked the slowdown to the deteriorating trade imbalance, Boracay and mining closures, faster inflation and lower output of the agriculture sector.
The second-quarter GDP growth brought the first-half average to 6.3 percent, below the government’s growth target range of 7 percent to 8 percent for 2018.
National Economic and Development Authority director-general and Economic Planning Secretary Ernesto Pernia said the economy needed to expand by at least 7.7 percent in the second semester to attain the low-end of the growth target for the year.
Pernia, however, said the second-quarter expansion still made the Philippines as one of the best-performing economies in Asia, next to Vietnam’s 6.8-percent growth and China’s 6.7 percent.
“To be fair and put things in proper context, the slowdown is partly due to policy decisions undertaken that are expected to promote sustainable and resilient development. We are referring to 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,” Pernia said.
He also mentioned the regulations in the mining sector, such as the closure of several mining pits and the excise tax on non-metallic and metallic minerals that resulted in the lackluster performance of the mining and quarrying sector.
“Moreover, the stricter enforcement of regulations on aquaculture producers at Laguna Lake resulted in the drop of freshwater fish catch,” Pernia said.
ING Bank Manila senior economist Joey Cuyegkeng said two sources of downside surprise were the deteriorating trade imbalance and soft agriculture sector performance.
PSA data showed that the trade deficit in the first half hit $19.10 billion, higher than the $11.75-billion shortfall a year ago.
London-based economic research consultancy firm Capital Economics said the slowdown in GDP growth would likely continue over the second half as tighter monetary policy and higher inflation were expected to weigh on consumer spending.
“The upshot is that, although the economy is set to perform relatively well over the next year or so, growth should continue to ease from around 6.5 percent this year to 6 percent in 2019. In contrast, the
consensus is expecting growth of 6.6 percent next year,” it said.