JOINT STATEMENT OF THE ECONOMIC TEAM ON THE PERFORMANCE OF THE PHILIPPINE ECONOMY FOR Q4 AND FULL-YEAR 2018
January 24, 2019
Philippine economic growth remained stable as it grew 6.1 percent in the fourth quarter of 2018 from the revised 6.0 percent recorded in the third quarter. This steady performance—the seventh consecutive year that the Philippine economy sustained its growth of more than 6.0 percent—brings our 2018 full-year growth to 6.2 percent.
This is a firm finish that cements the Philippines’ standing as one of the fastest-growing economies in Asia. We are next to India, Vietnam, and China. From Q1 to Q3 of 2018, we overtook Indonesia and Thailand in terms of economic performance.
As we are now in a higher growth trajectory, with our economy growing at an average of 6.5 percent in the first 10 quarters of the administration, we want to focus more on sustaining this momentum.
On the supply side, we are pleased to report the robust performance of industry, growing at 6.9 percent, fueled by the surge in construction as it grew by double digits to record its fastest pace since the first quarter of 2013. That’s a good indicator of the continuing driving force of the Build Build Build program.
Manufacturing, on the other hand, is an area of concern. For the last quarter of 2018, it grew only by 3.2 percent, a deceleration from 7.9 percent during the same period in 2017. This is due to the continuing US-China trade dispute, which dampened global demand, and the series of oil price increases in the world market as a result of the sanctions on Iranian oil exports.
To remedy this, the government needs to first address the policy uncertainties, increase macro-competitiveness by enhancing the efficiency of transport, communications, and the overall logistics network. To ensure inclusivity, we need to focus on the integration of industries between small and medium enterprises on one hand, and large establishments on the other.
We also need to attract more investments. Hence, we strongly favor the moves of Congress to amend the Foreign Investment Act, the Retail Trade Act, and the Public Service Act.
In addition to the massive investments in infrastructure that will help address the logistical concerns of the sector, these amendments will help attract foreign investments in manufacturing.
The numbers today clearly make the case for removing of policy uncertainties in the economic sector by introducing the next wave of reforms.
We are taking this opportunity to call on our partners and co-workers in Congress to pass these needed and urgent legislations.
Meanwhile, we note that agriculture slumped to a growth of 0.8 percent from 4.0 percent last year, with palay contracting by 1.0 percent. This clearly points to a thorough and honest-to-goodness reform of the sector.
The drop in palay production, sugar cane, and cassava tempered the gains of the sector in the fourth quarter. This was also due to several typhoons that hit Luzon, a normal occurrence in our country; and inadequate irrigation and insufficient rainfall in Central Visayas.
On the demand side, household consumption improved slightly amid increased private spending on food and non-alcoholic beverages. This was largely on account of slower inflation rates of these commodities.
Meanwhile, government spending remained stable into the fourth quarter. Better yet, growth in government spending nearly doubled from 2017 to 2018. Aside from spending on personnel services, maintenance and operating expenses continued to remain firm particularly social protection services, such as the Pantawid Pamilyang Pilipino Program.
For the year ahead, we expect household consumption to recover as inflationary pressures subside, given a subdued outlook on international oil prices and the expected reduction in rice prices from the enactment of the Rice Tariffication Law.
This law would generate tariff revenues that will be given to our farmers, boosting their productivity.
We will continue to be on the lookout for downside risks such as the US-China trade dispute dampening global demand, with higher tariffs and protectionist policies stifling investment and disrupting global value chains.
Other external downside risks are tighter financing conditions in emerging markets due to the strengthening of the US dollar and rising risk premiums, as well as heightened geopolitical tensions.
The government remains vigilant of inflation risks. Again, fast tracking preparations for the implementation of the Rice Tariffication Law given its nearing enactment will help mitigate this risk.
To protect lower-income households from TRAIN Law’s adverse effects on consumption, the unconditional cash transfers and fuel vouchers should likewise be implemented in a timely manner.
What we should note is that the re-enactment of the 2018 budget as the basis for our spending this 2019 will likely have an impact on government spending in the near term. This implies that the government would not be able to quickly execute programs and projects under the proposed 2019 budget. The 45-day ban on state spending prior to the May 2019 elections could also further delay implementation of infrastructure projects.
Potential growth drivers this year, meanwhile, would be the upcoming 2019-midterm elections and the preparations leading to the Southeast Asian Games in November. The creation of the Bangsamoro Autonomous Region would likewise open up growth prospects both for the region and for the wider economy.
We conclude by reiterating what needs to be done.
Restoring business confidence and opening up to foreign investments need consistency in policy environment. Taking into account long-term national security concerns, efforts to attract foreign investments will also ensure sustainable development.
The Philippine economy has been strong and steady. For 2019, we call for a cohesive reform agenda for the country. As we near the release of the Socioeconomic Report 2018 and mid-term updating of the Philippine Development Plan 2017-2022, we hope that the whole of government will be on the same page in addressing the challenges of the different sectors. More than just pockets of success in fulfilling their respective mandates, agencies, we hope, will see the bigger picture —that of having every project and every program lead to a matatag, maginhawa at panatag na buhay para sa lahat.