ERNESTO M. PERNIA
Socioeconomic Planning Secretary
Press Conference on the Performance of the Philippine Economyfor Fourth Quarter and Full-year 2017
January 23, 2018; 10:00 am
Astoria Plaza, Ortigas Center
Good morning, everyone.
Colleagues from the Philippine Statistics Authority,
Coworkers in government,
Friends from the media,
Ladies and gentlemen,
We are glad to report that the performance of the Philippine economy remains on target, hitting a solid 6.6 percent growth rate in the last quarter of 2017. This stable performance brings our full-year growth in 2017 to 6.7 percent—a strong finish that keeps our position as one of the fastest-growing economies in Asia after China’s 6.9 and Vietnam’s 6.8 percent.
Before you give a sigh of disappointment, let me give you some more comparisons with recent election and post-election years in our recent economic history.
Look at the performance in 2005, which was a post-election year. After an election year, a deep dive, and even deeper was the case in 2011, which was a post-election year after the 2010 election year.
And you can see that our decline is really very moderate at 0.2 percent of 1 percentage point. To me, this is a good performance, given the fact that it is already normal for post-election years to witness a decline in economic growth.
Growth in the fourth quarter was backed by robust growth of 14.3 percent in public spending—that was really the main driver, public spending—which was an increase from 4.5 percent in the previous year. This is very much in line with the government’s commitment to timely delivery of public services and social protection programs, including assistance to victims of typhoons as well as in the Marawi conflict, public scholarship programs, and health expenditure programs.
Also on the expenditure side, external demand improved with growth in exports of goods bouncing back to 20.2 percent in the fourth quarter from 17.2 percent in Quarter 3. This offset the services exports sector’s slowdown of 12.6 percent from 19.9 percent in the previous quarter.
We must note that a major contributing factor to this decline was miscellaneous services, which includes the BPO industry—business processing outsourcing. We can take this as an indication that the current market profile of the BPO sector is ripe to move into higher value added services. Domestic demand growth also strengthened to 7.3 percent in the fourth quarter from 6.4 percent in the third quarter. Fixed investments growth remained positive and accelerated to 9.3 percent with growth in durable equipment improving further to more than 12.1 percent. This is indicative of businesses’ continued confidence in the long-term prospects of the Philippine economy.
We also recorded stronger public construction spending at 25.1 percent that offset the 2.9 percent contraction in private construction. This keeps the overall construction growth in positive territory, which is a boost in line with our Build Build Build program.
On the supply side, we recorded improvements in utilities and mining.
Growth in services was supported by transport and communications, trade, and public administration, defense, and social security.
Agriculture recorded 2.4 percent growth in fourth quarter, having recovered from the decline of -1.3 percent in the same period last year.
With these developments, we move forward in 2018 with even stronger determination to accelerate growth to hit our target range of 7 to 8 percent. We are, of course, coming from the steady growth streak of 6.9 percent growth for full-year 2016 and 6.7 percent growth in 2017. Both are well within our growth range targets.
For 2016 and 2017, economic growth has been strong and steady. Our hope for 2018 and in the medium-term is to shift the trajectory upwards some more.
The Build Build Build program, of course, will continue its momentum in providing more opportunities to our country such as investments, job creation, connectivity, and dependable delivery of public services.
At the core of the program are 75 high-impact Infrastructure Flagship Projects that represent the major capital undertakings of the government, which will implemented within the medium-term. This includes transport, energy, irrigation and water supply projects to promote growth centers outside the urban-industrial region centered around Metro Manila.
To ensure that our capacity for growth is sufficient, we need to make sure that our labor force have the requisite skills and competencies to meet the growing demand, particularly for higher level skills. This is why we need to open our education sector and ramp up skills training programs towards greater learning opportunities for our current and future work force. This will help in upgrading the technical know-how and the skills needed to counter the plateauing of the IT-BPM sector’s development and in capacitating our workers for the demands of the Build Build Build program.
In the next quarter, we see the domestic demand picking up as household consumption will likely improve, following the recently approved tax reform package, which will result in higher take home pay for 99 percent of Filipino taxpayers. Household consumption is also seen to benefit from expanded employment opportunities from the Build, Build, Build program. Meanwhile, government consumption is seen to remain afloat, buoyed by the programmed increase in social spending, consistent with the implementation of the tax reform program. Government consumption is also set to expand, following higher salaries of government personnel in line with the third tranche of the Salary Standardization Law.
In our effort to accelerate growth, we continue to rally behind and look forward to seeing much-needed reforms such as the Revised Foreign Investment Negative List, or the 11th RFINL. The Revised FINL will help the country attract more investors by easing restrictions on foreign investments especially on public utilities, telecommunications, and higher level skills development. We are keen on attracting foreign direct investment flows that will make the Philippines more competitive. We must also make sure that we do not miss the second flow of FDIs for the ASEAN region, having already missed its first wave in the 1980s.
Even with a favorable growth outlook, we remain mindful that growth should be felt by every Filipino. We need to ensure that the benefits of the increase in take-home pay resulting from the tax reform, the Salary Standardization Law (SSL), and that economic growth will not be negated by inflationary pressures. We hope to accelerate the cash assistance to the bottom 50 percent of families in order to stem the possible, though short-term, inflationary impact of the TRAIN.
While we remain optimistic about the growth of the agriculture sector, based on generally positive outlook of rice and corn production in the first quarter of 2018, we should be aggressive in pursuing reforms in the sector. High up on the list is the lifting of the QRs or the quantitative restrictions on rice imports. This will improve the investment climate in the sector by eliminating policy uncertainty, thereby enabling farmers and farm operators to decide based on market and geophysical conditions. The resulting tariff revenues can be channeled back to the sector by way of better extension services to improve productivity. There should also be greater public investments to build the resilience of the sector. The expected outcome is a substantial reduction in the retail price of rice, and the higher and more stable income of farmers.
Certainly, the Philippine economy remains strong and there is still more room to grow. The government remains committed to making this growth inclusive. And we hope the private sector and every Filipino will be one with us in our effort to translate this growth into what we have termed: matatag, maginhawa at panatag na buhay para sa lahat. Thank you very much and mabuhay tayong lahat!