The gross domestic product of the Philippines expanded 6.4 percent in the fourth quarter from a year ago, becoming the second-fastest growing economy in the region, data from the Philippine Statistics Authority show.
“The growth of the Philippine economy continued to accelerate in the last quarter of 2019 to 6.4 percent from the revised 6 percent in the previous quarter and 6.3 percent in the last quarter of 2018. This is in line with the median forecast of the private sector,” said Economic Planning Secretary Ernesto Pernia.
“Compared with other major economies in the region that have already released their GDP growth in the fourth quarter, the Philippines likely ranked second only behind Vietnam’s 7 percent, and higher than China’s 6 percent growth rate in the fourth quarter,” said Pernia, who is also the director-general of the National Economic and Development Authority.
“This fourth-quarter 2019 outturn brings the full-year 2019 economic growth to 5.9 percent, the slowest in eight years and slightly below the low-end of the 6 percent to 6.5 percent revised target of the government for the year,” Pernia said.
It was the first time in eight years that the economy grew below 6 percent, as the delayed approval of government budget affected public spending in the first half of 2019.
“If not for the budget impasse, we might have grown close to 7 percent [for the entire year], that is our estimate,” Pernia said, adding the delayed approval of the P3.7-trillion 2019 budget resulted in a full percentage point loss in economic growth for the entire year.
Finance Secretary Carlos Dominguez III said the pickup in growth in the fourth quarter resulted in part from the government’s catch-up spending. He said the economy “will gain speed in 2020, with the domestic economy firing on all cylinders as a result of even more vigorous investments in infrastructure and human capital development for the entire year ahead.”
The PSA said among major economic sectors, services posted the fastest growth in the fourth quarter with 7.9 percent, followed by the industry sector with 5.4 percent. Agriculture, hunting, forestry and fishing registered a growth of 1.5 percent.
It said that on the demand side, the growth was driven by the ramping up of government spending after the budget delay in the first half of 2019. Public construction surged 34 percent in fourth quarter 2019, with the completion of projects of the Public Works Department, payment for the acquisition of right-of-way and construction of government buildings.
Data showed that with the country’s projected population reaching 108.7 million in the fourth quarter, per capita GDP grew by 4.8 percent.
Pernia said that for 2020, there could be “spoilers” to growth such as the geopolitical tensions in the Middle East and the weather disturbances in the domestic front.
He said that lawmakers might have learned their lessons on the impact of a delayed budget approval to economic growth, as Congress and the Department of Budget and Management “ensured the timely passage of the 2020 General Appropriations Act and also approved the validity extension of the 2019 fiscal program until the end of this year — both of which are critical to our efforts to spur economic growth.”
Pernia said the government should effectively manage inflation to boost household consumption by proactively addressing potential supply shocks especially on key agricultural commodities.
Inflation peaked at 6.7 percent in October 2018 but the implementation of the government’s immediate measures to curb faster increases in consumer prices caused inflation to decelerate in the succeeding months.
Inflation averaged 2.5 percent in 2019, slower than 5.2 percent in 2018.
Pernia also asked the government to remain vigilant on the developments in the international oil market with the recent emergence of tensions in the Middle East, which could put upward pressure on domestic oil prices and other energy-related items.
“The continuing eruptions of the Taal volcano and onslaught of typhoons in the latter part of 2019 have brought significant damage in the agriculture and fishery sector in CALABARZON especially. The agriculture department and concerned local government units should fast-track the release of production support and cash/loan assistance programs to the affected farmers and fisherfolk, as well as the implementation of the recovery and rehabilitation plans for the affected areas,” he said.
ING Bank Manila senior economist Nicholas Mapa said the slower growth of 5.9 percent in 2019 pointed to the resumption of the monetary policy easing of the Bangko Sentral ng Pilipinas in 2020.
“Government spending and robust household consumption paved the way for the strong finish to the year. Household consumption, which drives the bulk of economic activity grew 5.6 percent with inflation falling below the lower-end of the BSP’s inflation target in both October and November. Meanwhile, authorities attempted to implement catchup spending with government expenditure posting 18.7-percent growth,” Mapa said.
“The subdued pace of recovery coupled with a higher growth aspiration [government 2020 target at 6.5-7.5 percent] means that the Philippine economy will likely need a boost from both fiscal and monetary policy,” he said. BSP Governor Benjamin Diokno earlier hinted at a possible 25 bps rate cut by the first quarter to bolster GDP growth.
“The growth miss and recent [Taal] volcanic eruption’s damage could prod the BSP to cut policy rates sooner rather than later. We continue to pencil in a 25 bps rate cut at the Feb. 6 meeting given the disappointing growth numbers,” Mapa said.