A first-quarter increase of .2 percent in Gross Domestic Product (GDP) is so miniscule that it is nothing to crow about, as the private sector has pointed out, but it never fails to puzzle us by Secretaries Recto and Balisacan are boasting it as a positive development.
Socioeconomic Planning Secretary and head of the National Economic and Development Authority (NEDA) Arsenio Balisacan said that the first-quarter 5.7-percent GDP growth figure is among the highest among Asian economies, demonstrating the resiliency of the Philippine economy.
Private analysts, however, found the first-quarter GDP growth figure disappointing, as it fell below their consensus of 5.9 to above 6 percent. The figure was just .2-percent higher than the 3rd quarter of last year.
“This was primarily attributed to subdued household spending, which grew by a mere 4.6 percent… amid persistent inflationary pressures and the ongoing El Niño phenomenon,” said Luis Limlingan, managing director at Regina Capital Development Corporation.
Philstocks Financial Inc. researcher Mikhail Plopenio described the first-quarter GDP figure as “dismal.”
“This raised worries over the country’s economy amid the lingering headwinds, including inflation and elevated interest rates,” he added.
Nonetheless, Balisacan remains optimistic on the country’s GDP growth for this year, expecting it to settle between 6 and 7 percent.
Mixed reactions continued to flow as the 5.7 percent is below the 6.4 percent registered in the same period last year. However, the latest GDP figure was slightly higher than the 5.5 percent of the last quarter of 2023, indicating a slight recovery.
Notably, the GDP growth target set by the Development Budget Coordination Committee (DBCC) for this year is 6 to 7 percent, which is a slight revision of earlier forecast of 6.5 to 7.5 percent after factoring in trade growth, oil prices, and inflation trends.
Philippine first-quarter economic growth equaled that of Vietnam and surpassed that of China (5.3 percent), Indonesia (5.1 percent), and Malaysia (3.9 percent).
"Despite our challenges on both domestic and international fronts, our economy continues to demonstrate remarkable resilience and growth. This performance retains the country's position as a leading force among Asia's emerging economies," Balisacan said.
He added that the government is doing all it can to contain the effects of the El Niño that has so far caused almost P6 billion in damage to agriculture as of the first week of May this year. The biggest damage was recorded on rice farms with about P3.14 billion, causing rice inflation to remain elevated in the first quarter of this year.
"I would have thought that the impact would be worse than what actually happened. It's not to say that it was not a serious harm especially to some areas and certain groups of our population. But nonetheless, I think that we are able to bounce back from an otherwise worse situation," Balisacan said.
The good news is the El Niño is seen weakening starting this month.
Growth factors
According to the Philippine Statistics Authority (PSA), most of the sub-sectors under the GDP registered positive growth with the services sector also among the leaders. However, there was a slowdown in government spending.
Among the contributors to growth include the financial and insurance activities at 10.0 percent, wholesale and retail trade and the repair of motor vehicles and motorcycles at 6.4 percent, and manufacturing at 4.5 percent.
Also, the output of industry went up by 0.4 percent and services by 6.9 percent went. The agriculture, forestry, and fishing (AFF) sector grew by only 0.4 percent, demonstrating the adverse effect of the El Niño.
However, household final consumption expenditure increased by 4.6 percent from last year’s 6.4 percent, while government spending was a laggard at 1.7 percent from 6.2 percent.
To recall, the slowdown in government spending in the second quarter of 2023 was the biggest factor for the disappointing 4.3-percent GDP growth in that period.
"Meanwhile, government spending also slowed down, primarily due to the sliding of a large amount of expenditure to April this year, whereas the government made such spending in March last year," Balisacan said.
He added that household spending slowed down due to inflation issues caused by elevated prices of major food items and the effects of current El Niño.
"Despite various risks and challenges, the economic outlook for the Philippines in the near and medium term remains bright. With hard work and the right policies in place, we are confident that we will achieve our growth target of 6 percent to 7 percent this year,” he said.
“The Marcos administration remains committed to achieving rapid, sustained, and inclusive economic growth, leading to a matatag, maginhawa, at panatag na buhay for all Filipinos," he added.
For his part, Finance Secretary Ralph Recto sees a GDP growth of above 5.5 percent for the first quarter as a positive development.
"Anything higher than 5.5 is a win because last year we grew by 5.5. So, if we grew by 5.8 that's good enough, that should be one of the highest in the region if not one of the highest in the world. So based on our analysis, 5.8 to 6.3 for the first quarter," he said.
The International Monetary Fund (IMF) also harbors the view that the Philippines is one of the more resilient economies in the region, with domestic demand a big factor for its growth.
"India and the Philippines have been the source of repeated positive growth surprises, supported by resilient domestic demand," the IMF said in its April 2024 Regional Economic Outlook for Asia and Pacific report.
IMF Director of the Asia and Pacific department Krishna Srinivasan added that Philippine inflation is going down.
"The Philippines is one country which has done very well in terms of...the growth is being resilient (and) inflation is coming down," he said.
The international lender expects the Philippine economy to grow by 6.2 percent this year and in 2025.
Last year, the Philippine economy grew by 5.6 percent, which was better than major economies in Asia, such as China (5.2 percent), Vietnam (5.0 percent), and Malaysia (3.8 percent).
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