Gov't spending drives Q3 GDP growth, contributes 2.1 percentage points

The recovery in government spending following the implementation of the expenditure catch-up plan helped the economy grow faster during the third quarter of 2023 despite dampened consumer spending during the period.

Data released by the Philippine Statistics Authority (PSA) showed the country’s gross domestic product (GDP) grew faster at 5.9% during the July to September period, from 4.3% in the second quarter.

In a statement, the Department of Budget and Management (DBM) said the faster state spending “contributed a significant 36% or 2.1 percentage points of the Philippines’ remarkable 5.9% GDP growth in the third quarter of 2023.”

In particular, government final consumption expenditure (GFCE) grew by 6.7% during the period from a contraction of 7.1% in the second quarter.

Meanwhile, the government fixed capital formation saw an increase from 0.7% in the second quarter to 6.7% in the third quarter.

The contraction in state spending was among the main culprits, along with high inflation and elevated interest rates, in the slowdown in the second quarter GDP growth this year.

Underspending among government agencies triggered the Marcos administration to order a catch-up plan to prop up public expenditure.

“We commend the national government agencies and local government units for responding to the economic team's call to implement catch-up expenditure plans. These plans aim to expedite the implementation of government programs and projects and improve the delivery of public services under the 2023 public expenditure program. These actions addressed the contraction in government spending in the previous quarter. We hope to maintain this momentum for the remainder of the year and the years to come,” said National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan.

Last August 9, 2023, Budget Secretary Amenah Pangandaman, released Circular Letter No. 2023-10, ordering all government agencies to produce catch-up plans to address the underspending during the second quarter. 

“I am confident that as we work together in unity and with our whole-of-government approach, we will remain on track with our Agenda for Prosperity,” said Pangandaman.

While government spending recovered, consumer spending continued its downtrend with household final consumption expenditure (HFCE) grew slower at 5%, from 5.4% in the second quarter and 8% in the same quarter last year.

Balisacan said food inflation of 8.2% during the period was to blame for the dampened consumption.

Nonetheless, the NEDA chief expressed confidence that the deceleration of inflation seen in October will continue in the remaining months of 2023.

Inflation or the rate of increase in the prices of goods and services slowed down in October as it clocked in at 4.9%, down from 6.1% in September.

“So the focus is ensuring that reduction, decreasing inflation for October 2023 will be sustained in the coming months,” he said.

The full-year target of 6% to 7% GDP growth, Balisacan said is “still doable” and “within reach,” noting that the economy needs to grow by 7.2% in the last quarter of the year to hit at least the low end of the goal.—AOL, GMA Integrated News