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Shutdown of Boracay, a Tourist Hotspot, Drags Philippine Economic Growth

Dennis Jay Santos
Davao, Philippines
2018-08-09
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Paddlers enjoy the sunset on the postcard-perfect beach of Boracay island in the central Philippines, March 28, 2018.
Felipe Villamor/BenarNews

The Philippine economy slowed down sharply in the second quarter of the year, the government’s chief economist said Thursday, partly attributing the decline to President Rodrigo Duterte's policy decisions that included the shutdown of a world-class beach destination that once raked in top tourism revenues.

The nation’s Gross Domestic Product grew 6 percent in the three months to June, a rate that Manila believes is “less than what we had hoped for,” Economic Planning Secretary Ernesto Pernia said. The GDP data was much slower than the 6.6 percent growth posted in the first quarter.

“To be fair and put things in proper context, the slowdown is partly due to policy decisions undertaken that are expected to promote sustainable and resilient development,” Pernia said in a statement. “We are referring to the temporary closure of Boracay Island from April to October 2018, which partly made a dent on the economy.”

Tourism officials shut down Boracay island for a six-month massive cleanup beginning April after Duterte complained that its beaches have become a “cesspool.”

The island, famed for its powdery white sand beaches, had been a popular tourist destination and has traditionally kept tourist arrivals up for the tropical country. Last year, the Boracay tourism sector pulled in 56 billion pesos (about U.S. $1 billion) in revenues.

The second quarter figure was the slowest in three years, ending a phenomenal run of some 10 quarters of consecutive growth rates of above six percent that had earned the Philippine economy the distinction of one of the region’s best performers.

Figures as to how much Boracay lost in revenues were not immediately available, although officials had earlier estimated about $8 million. Many of the island’s 40,000 residents had also lost their jobs.

Pernia said stricter government regulations on the mining sector imposed by the government had also led to the closure of several mining sites, adding to the reduction of revenue collections. The mining sector retreated 10.9 percent during the period.

Still, the Philippines growth rate still places the country as one of the best performing economies in the region, after Vietnam whose economy grew 6.8 percent and China’s 6.7 percent in the same period in review, he said.

He said he was strongly urging the “tariffication of rice imports” as a crucial measure to address food supply and its impact on inflation.

“It will reduce the policy uncertainty in rice trade, and hopefully, encourage more productive investments in the sector,” Pernia said.

“While headline inflation has risen in the past six months, the month-on-month numbers showed a downward trajectory, so that inflation should moderate by the end of the year in line with the forecast of the BSP,” he said, referring to the country’s Central Bank by its Filipino acronym.

Inflation rate in July hit 5.7 percent, the highest in five years.

Pernia said the expected reopening of Boracay in October should help boost full year growth.

Manila, he said, has good reason to be bullish about prospects for tourism and other service sectors in the fourth quarter.

Felipe Villamor in Manila contributed to this report.

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