Third Quarter Cripples Growth for Philippine Economy
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Economic expectations were left uncertain as recent reports showed Philippine’s growth for the third quarter to be slower than normal. GDP fell to 5.3%, significantly lower than the 6.4% gain during the second quarter, and lower than the 7% growth seen during the same period last year. Currently, the gross domestic product is at its slowest pace since 2011, and there are numerous factors to blame.
Economic expectations were left uncertain as recent reports showed Philippine’s growth for the third quarter to be slower than normal. GDP fell to 5.3%, significantly lower than the 6.4% gain during the second quarter, and lower than the 7% growth seen during the same period last year. Currently, the gross domestic product is at its slowest pace since 2011, and there are numerous factors to blame.
News of the problems resulted in forecast downgrades for the country’s overall growth this year. Trinh Nguyen, an economist from HSBC, expects growth lower than 6%, whereas Rahul Bajora of Barclays reduced his forecast from 6.5% to 6%. The slowing growth in recent data prompted the central bank to hold back on raising interest rates – an issue covered in a meeting during December.
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The Most Important Sectors
Although all sectors decelerated during the third quarter, the Philippine services sector continued to be the main force behind GDP growth, accounting for 5.4% of the total. Unfortunately, according to Lisa Bersales, a National Statistician, the service sector has been gradually slowing since the first quarter of 2014.
The industry sector slowed slightly, to 7.6%, in comparison to 7.7% in 2013, and the previous quarter’s growth of 7.9%. Together, the service sector and the industry sector provided 3.1% and 2.4% to GDP, respectively. Agriculture, on the other hand, declined approximately 2.7%, the lowest level since the final quarter of 2009. The loss for the third quarter brought GDP growth down about -.03%, according to the national statistician.
Stunted Growth and Government Underspending
According to ING Bank Senior economist Joey Cuyegkeng, underspending by the government may be the primary reason for slower growth during the third quarter. The government received a significant amount of criticism in the past for spending less than they should, despite the need to accelerate disbursements and support reconstruction in areas affected by typhoons.
Between January and September of this year, government spending reached approximately P1.46 trillion, or about $325.13 billion. This number is 16% below the country’s target, which was P1.73 trillion, or $384.66 billion. According to Finance Secretary, Cesar Purisima, the government still has a lot of space to accelerate expenditures. All aspects needed for growth are available, the government simply needs to move in the right direction, be less corrupt, and lower taxes. The latter always seems to do the trick.
Impressive Numbers if Obtained
Currently, statistics suggest that it will be difficult for the Philippines to reach their growth target of between 6.5% and 7.5% for GDP this year.
