Philippine Economy on Track for Healthy Growth, Despite Weaker First Quarter: Officials

The Philippine economy grew slower than expected in the first quarter of 2017 but remains on track to achieve robust growth during the year, government officials said Thursday.

The Philippines is among the fastest growing economies in the Asia-Pacific region but a 6.4 percent expansion in gross domestic product during the first three months of the calendar year was below a quarterly target of around 7 percent the government was hoping for, officials said.

The growth recorded in the first quarter was also the smallest quarterly expansion in the economy since President Rodrigo Duterte took office in June 2016, according to government statistics.

But the figure of 6.4 percent was still within range for Manila to hit a whole-year growth target of between 6.5 percent and 7.5 percent, said Economic Planning Secretary Ernesto Pernia.

“Our first quarter performance bodes well for the economy as it is broadly in line with this year’s government target,” Pernia said in a statement.

The growth may have been less than expected but it overtook Vietnam’s and Indonesia’s 5.1 percent and 3.3 percent, respectively, during the first quarter. The Philippines placed second behind China’s 6.9 percent economic growth, although India had not released its data for the first three months, Pernia said.

Explaining the lesser than desired quarterly growth, he said investors had gone into wait-and-see mode as Duterte’s government hurdles its first year.

The positive economic performance, however, could also mean that the country has benefited from reforms instituted by the previous government of Benigno Aquino III, who had prioritized savings even as he encouraged spending to pump prime the economy, Pernia said.

“This further demonstrates the strategy of the Duterte administration, which is to sustain good practices, and improve upon or correct those that require improvement,” he said.

The economy was propped up by a great comeback in the agriculture sector, which grew 4.9 percent after several quarters of decline.

The services sector continued to be the main driver of growth, increasing 6.8 percent while industry expanded by 6.1 percent.

“Moving forward, the domestic economy is poised to maintain its growth momentum with the recovery of external trade and the private sector’s steadfast optimism,” Pernia said. “The government has also been busy laying down a strong foundation for sustainable and equitable growth with an ambitious infrastructure program.”

Finance Secretary Carlos Dominguez said the first quarter growth figures indicated that the economy was largely expected to sustain the momentum.

Philippine legislators could also help by passing a comprehensive tax reform program pending in congress that would guarantee a “steady revenue stream for the Duterte administration’s  high and inclusive growth agenda,” he said.

​Controlled by allies of Duterte, the House of Representatives is set to start plenary deliberations next week, and it hopes to pass the measure for referral in the Senate before Congress adjourns next month.

The tax bill aims to lower personal income tax rates as well as donor and estate taxes. It would, however, broaden the tax base by raising the excise tax on automobile and fuel while plugging leakages in the value-added tax base.

Construction activities were also expected to go into high gear in the coming months, again on the back of Duterte’s “build, build, build” mantra, Pernia said.

He said the government was aiming to spend some 5.3 percent of gross domestic product this year on infrastructure and up to 7.4 percent by 2022.