Philippine GDP Growth Rate Dips to 5.5% in Q2 of 2019, Marking New 4-Year Record Low
ILLUSTRATOR Roland Mae Tanglao
The Philippine economy dipped slightly during the second quarter of 2019 as Gross Domestic Product (GDP) grew by 5.5 percent, the Philippine Statistic Authority (PSA) announced on Thursday, August 8.
This is a 0.1 point drop from the first quarter’s GDP growth of 5.6 percent in the first quarter, marking the lowest growth rate in the last 17 quarters since 2015’s 5.0 percent in the first quarter. 2019’s second quarter growth is also a step down from 2018’s revised second quarter growth, posted at 6.3 percent.
Dr. Ernesto Pernia, Secretary of Socioeconomic Planning, noted that the second quarter performance was weakened by Congress’ delayed enactment of the P3.662 trillion 2019 General Appropriations Act (GAA), which President Rodrigo Duterte signed only on April 15. Pernia also attributed the negative growth rate to El Niño, international trade issues, and the midterm election ban on infrastructure projects.
The sectors that saw the most growth were: services, which grew by 7.1 percent; industry, which grew by 3.7 percent; and agriculture, which grew by 0.6 percent. PSA also noted that the population has grown to 107.9 million in the second quarter. The services, industry, and agriculture sectors also had the highest contribution to GDP growth with 4.3 percentage points, 1.3 percentage points, and 0.04 percentage points, respectively.
The growth rates of Net Primary Income (NPI), Gross National Income (GNI), and GDP Per Capita in the second quarter each dipped by 0.1 points from the first quarter to 3.1 percent, 5.1 percent, and 3.8 percent, respectively.
Pernia also noted that the weak performance of the first and second quarters will require the third and fourth quarters to reach at least a 6.4 percent growth rate in the second half of the year in order to reach the 2019 yearend growth target of six to seven percent. He predicted that the next quarter will yield a growth rate ranging from six to 6.5 percent.
The socioeconomic planning secretary explained that the government will have to implement a strong catch-up plan in order to make up for lost time. He recommends wrapping up spending on infrastructure projects and prioritizing reforms to improve the government in the legislative branch, particularly the TRABAHO Bill. He also emphasized the necessity of processing the budget for 2020 early if not ahead of time to ensure continuous economic growth.
“This is crucial to the delivery of the government’s promises,” said Pernia.
The National Economic and Development Authority (NEDA) previously attributed the low growth rate of the previous quarter to a number of delays caused by Congress, particularly the Senate-House deadlock over the 2019 General Appropriations Bill. The delay caused the government to operate under the reenacted 2018 budget for the entire first quarter. Had the bill been passed on time, NEDA said that the first quarter growth rate could have hit 7.2 percent.
The bill originally proposed a P3.75 trillion national budget for 2019, however the president vetoed P95.2 billion from contested items that he found inconsistent with administration priorities. The total 2019 operating budget is now P3.662 trillion.
2019 Revised Target
“We may have to tweak six to seven percent GDP growth target for 2019 just to be realistic about this year,” said Pernia.
In order to reach the new target, now ranging from 6 to 6.5 percent, the Philippine GDP in the third and fourth quarters of 2019 will have to achieve at least an average of 7.45 percent for the second half. The last time the economy achieved a 7.0 percent growth was in the third quarter of 2017.
As seen in the graph above, the national GDP growth rate has been on the decline since 2016, which was the strongest year since 2013’s 7.063 percent GDP growth rate.