Philippine economy grows slower to 7.4% in Q2

The Philippine economy grew at a slower pace in the second quarter of the year, the Philippine Statistics Authority (PSA) reported on Tuesday.

The country’s gross domestic product (GDP) — the total value of goods and services produced in a specific period — grew by 7.4% during the April to June period, slower than the downwardly adjusted 8.2% GDP growth in the first quarter of the year. 

The second quarter GDP also compares with the 12.1% growth in the same period last year.

Quarter-on-quarter, the economy saw a contraction of 0.1%.

“The global headwinds, particularly inflation, those coming from fuel and food contributed to that somewhat slowdown,” Socioeconomic Planning Secretary Arsenio Balisacan said at a press conference.

Inflation has been growing faster in April (4.9%), May (5.4%), and June (6.4%) as global oil supply disruptions brought by the Ukraine-Russia war and domestic supply challenges kept fuel and food prices elevated.

Balisacan said that if not for inflation, the second quarter GDP “definitely it would be better.”

The National Economic and Development Authority (NEDA) chief said that inflationary pressures to growth are expected to continue in the second half of the year.

Nonetheless, he said the global headwinds and inflation are already taken into consideration in the economic managers’ target of 6.5% to 7.5% growth for the entire year.

Balisacan said that to hit the lower end of the target, the second half GDP should grow 5.3%. Meanwhile, to achieve the upper end of the goal, the economy should grow 7.2% in the July to December period.

As of the first half of the year, the country’s GDP grew at 7.8%, according to the NEDA chief. 

Despite the slowdown, Balisacan said the second quarter GDP print “places the country as the second best-performing nation among the region’s major emerging economies that have released their second quarter reports.”

“Our country is next to Vietnam's 7.7% but faster than Indonesia's 5.4% and China's 0.4%. This performance also remains in line with our expectations, or our expected 6.5 to 7.5% growth in 2022,” he said.

The country’s chief economist cited the deceleration in the manufacturing sector growth to 2.1% from 22.4% in the same quarter last year.

“The slowdown was due to the weaker growth in computers, electronic and optical products, chemical and chemical products, and food products,” he said.

“The slowdown may be due to inflationary pressures brought about by the Russia-Ukraine war, weakening global demand, and supply chain disruptions brought by lockdowns in China,” he added.

Contributors to growth

National Statistician and PSA chief Claire Dennis Mapa said the main contributors to the second quarter growth are services sector with 5.5 percentage points contribution followed by industry with 1.9 percentage points share.

Agriculture, forestry, and fishing contributed 0.02 percentage points to the 7.4% second quarter GDP growth.

In particular, agriculture, forestry, and fishing; industry; and services all posted positive growths during the period at 0.2%, 6.3%, and 9.1%, respectively.

Balisacan said the government will provide support through lower input costs, access to new farming technologies, financial assistance to farmers, and strengthening the agricultural value chain given the agriculture sector's tepid performance.

On the demand side, household final consumption expenditure (HFCE) grew by 8.6% in the second quarter; government final consumption expenditure rose 11.1%; gross capital formation up 20.5%; exports of goods and services increased by 4.3%; and imports of goods and services climbed by 13.6%.

Easing restrictions

Balisacan said the “timely changes in COVID-related policies, such as easing alert levels, removing tourism restrictions, and accelerated vaccine rollout, helped increase economic activities.”

As of June 2022, he said, around 85% of the economy is already under Alert Level 1.

“That these changes were implemented during the recently-held national and local elections demonstrate that, indeed, ‘living with the virus’ is possible,” the NEDA chief said.

“We are committed to pursuing the country's full reopening, including the return of face-to-face schooling to address the learning losses and increase domestic activities. This push will begin with the health sector's efforts to increase booster uptake,” he said.

“Recently, the Department of Health launched the ‘PinasLakas’ campaign, which aims to boost 50% of the 78 million target population within the first 100 days of the Marcos administration. This move will allow more areas to de-escalate to Alert Level 1 and, eventually, the complete removal of restrictions that hinder economic activity,” he added.

The NEDA chief said the full reopening of the economy will indeed generate more income-earning opportunities.

“But the purchasing power of that income may be eroded by the high inflation, primarily resulting from increased fuel and food costs. Consequently, the government is focused on ensuring food security and reducing transport, logistics, and energy costs,” Balisacan said.

To help the vulnerable sector, the NEDA chief said the Department of Budget and Management has recently approved the release of the second tranche of the Targeted Cash Transfer Program, which amounts to P4.1 billion and will benefit four million Filipino families.

“The distribution of targeted subsidies for PUJ drivers and operators, including tricycle drivers, and fuel discounts to farmers and fisher folk will help cushion the impact of elevated oil prices on vulnerable groups,” Balisacan said. — KBK/RSJ, GMA News