Philippine economy grows at slowest pace in nearly 2 years
GDP up 6.4% in Q1; public investment snagged by birth pains
MIKHAIL FLORES, Nikkei staff writer
MANILA -- The Philippine economy grew at its slowest pace in nearly two years, the government reported on Thursday, as consumer spending slowed and the government struggled to roll out key infrastructure projects.
The Philippines' gross domestic product grew 6.4% on the year in the first quarter, the Philippine Statistics Authority said, falling short of market expectations. Growth in the first three months was the slowest since the second quarter of 2015, as consumer spending fell back to normal levels following an election year.
The Philippine economy usually slows down the year after an election. In 2014, GDP growth dropped to 6.1% from 7.2%; in 2011, growth declined sharply, to 3.7% from 7.7% the previous year.
Consumer spending, which accounts for around 70% of total output, continued to buoy the Philippine economy, but the increase in spending was the slowest in more than two years. Inflation, which has jumped compared with last year, also put a damper on domestic demand, Socioeconomic Planning Secretary Ernesto Pernia said. Household consumption totaled 2.7 trillion pesos ($54 billion) at current prices, up 9% on the year but down 11% from the previous three months.
"Incidentally, the main factor bringing up the inflation rate had to do with food prices, including rice," Pernia said. Capital formation, at current prices, reached 910.1 billion pesos in the first quarter, up 14.3% from the previous year but 9.5% lower than in the fourth quarter of 2016.
Investment, which contributed a quarter to overall GDP, grew to its slowest pace since the fourth quarter of 2014, largely due to a slowdown in public works, especially among local governments. "I think this has to do with the changing of the guards. The administration had to find its footing," Pernia said.
Government spending contributed a tenth to overall GDP. While funds are available, government agencies, struggling with bureaucratic rules, are having trouble getting key projects off the ground.
Pernia said government spending should pick up in the coming quarters, once major infrastructure projects are implemented, but the slowdown has cast a shadow on President Rodrigo Duterte's ambitious infrastructure program.
Dubbed "Dutertenomics" and touted as the "golden age of infrastructure," the Philippines plans to spend 8.4 trillion pesos ($169 billion) over a six-year period and raise the share of infrastructure spending to 7.4% of GDP by 2022.
The Duterte administration hopes the public investment will further boost economic expansion and spread wealth to the countryside, but major projects are still on the drawing board. Pernia said the expansion of Clark International Airport, for example, an alternative gateway north of Manila, could only start late in the year, "at best."
"It takes time," he said.
To speed up spending, the government plans to ask Congress to amend budgeting rules aimed at clearing bottlenecks for key government projects. Duterte also prodded his cabinet to "use it or lose it." That is, to spend their budgets or risk having them axed.
Despite falling short of market expectations, the Philippines was the second-fastest growing big Asian economy, next to China. India is scheduled to report its first quarter results May 31.
"While Q1 growth disappointed, it remains robust. We continue to expect government spending to accelerate with the administration's strong push to implement public-sector infrastructure projects," Japanese investment bank Nomura said in research note.
Pernia said that the Philippines remains on track to meet its 6.5-7.5% growth target for the year, and that public spending should pick up sharply in the next three quarters.
"We aim to gain a strong footing in the succeeding quarters as we move forward with plans and programs included in the Philippine Development Plan," Pernia said, referring to Duterte's economic blueprint for inclusive growth.