NEWS

By Arthur Fuentes | ABS-CBN News | August 8, 2024

MANILA (UPDATE)– The Philippine economy expanded 6.3 percent in the second quarter amid a construction boom, the Philippine Statistics Authority reported on Thursday.

This was faster than the revised 5.8 percent gross domestic product expansion in the first quarter, and it also brought the average growth rate for the first half to 6 percent. The government is targeting a GDP growth rate of 6 to 7 percent this year. National Economic and Development Authority Secretary Arsenio Balisacan said that for the lower end of the target to be achieved, the Philippines would need to grow 6 percent in the second half.

“This performance gives our position as one of Asia’s best performing major emerging economies. For East Asia’s economies that have released their second quarter 2024 GDP growth, we follow behind Vietnam at 6.9 percent, while leading Malaysia at 5.8 percent, Indonesia at 5 percent, and China at 4.7 percent,” said Balisacan.

Construction made the biggest impact on growth according to National Statistician and PSA Undersecretary Dennis Mapa.

“On the demand side, the Gross Fixed Capital Formation in construction recorded the highest increase of 16.1 percent in the second quarter of 2024,” Mapa said.

Both public and private construction contributed to growth, Balisacan noted.

“Public construction sustained double-digit growth at 20.8 percent from 12.1 percent, as the government’s infrastructure agencies expedited the rollout of the Marcos administration’s construction and rehabilitation projects. Encouragingly, private construction likewise accelerated to 9.9 percent from 5.3 percent, particularly commercial construction to 13.6 percent from 6.8 percent,” Balisacan said.

During Wednesday’s press briefing on the country’s employment figures, Mapa noted that construction added almost a million jobs in June this year compared to June last year.

Aside from infrastructure projects, government spending also contributed to the GDP growth through various social protection, health, and education programs, Balisacan said. Preparatory activities for the 2025 national and local elections also boosted spending.

The construction sector was followed by wholesale and retail trade; repair of motor vehicles and motorcycles which grew 5.8 percent; and financial and insurance activities which grew 8.2 percent, Mapa added.

AGRICULTURE, HOUSEHOLD SPENDING

Meanwhile, the Agriculture, forestry, and fishing sector posted a year-on-year decline of 2.3 percent. Balisacan said this largely because of the effects of the El Nino phenomenon. On a quarterly basis, agriculture also declined by 1.6 percent amid lower production of palay, corn and sugarcane.

Consumer spending or Household Final Consumption Expenditure was the top contributor to the increase in country’s GDP, which grew year-on-year by 4.6 percent in the second quarter of 2024, the PSA said. But on a quarter-on-quarter basis, household spending actually declined by 0.1 percent. The top contributors to the decline were restaurants and hotels; health; and clothing and footwear, the PSA said.

For 2025, the government is targeting a GDP growth rate of 6.5 to 7.5 percent next year. These growth targets were already lowered from an earlier 6.5 to 7.5 percent growth rate this year, and 6.5 to 8 percent in 2025 amid headwinds like high inflation and high interest rates.

Inflation has been a constant concern for economic managers, with the consumer price index breaching the 2 to 4 percent target last month. Balisacan signaled that the government is ready to boost food imports to tame inflation.

“The government will continue its push for food security by managing food inflation with appropriate supply-side measures.

In the near term, we commit to utilizing strategic trade policy to augment insufficient domestic food supply to meet rising demand,” Balisacan said.

He also noted that economic growth would have been faster if interest rates were not so high.

“Considering the lag effect of interest rate hikes that the Bangko Sentral ng Pilipinas carried out in response to the high inflation in 2022 and early 2023, we estimate that economic growth could have been over half a percentage point higher in 2023 if such hike rates did not materialize.

The BSP has been keeping its benchmark rate at 6.5 percent since November last year in a bid to tame inflation. Economic managers and some analysts believe that inflation will move back to within the target range in August as a raft of measures meant to bring down prices kick in. The BSP has also hinted that it may cut rates as early as August.

Source: ABS-CBN News

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