SECRETARY ARSENIO M. BALISACAN
Economic Planning Secretary and NEDA Director-General
Press Conference on the 2015 Third Quarter Performance of the Philippine Economy
Destiny Function Room, Elements at Eton Centris Bldg., EDSA, Quezon City
26 November 2015, 10:00 AM
Ladies and gentlemen, members of the media, good morning.
The 6.0-percent growth in the Philippines’ real gross domestic product in the third quarter of this year is certainly an encouraging sign of a steadily growing economy. The third quarter growth is an improvement from 5.8 percent in the previous quarter and from 5.5 percent in the third quarter in 2014. Growth in the first nine months of 2015 is now 5.6 percent, making a 6.0-percent full-year growth very much likely given even better prospects for the last quarter. This makes the Philippines one of the fastest-growing major Asian economies. The country’s GDP growth was the third fastest after China’s 6.9 percent and Vietnam’s 6.8 percent. As of today, the third-quarter figure for India, another fast-growing Asian economy, is not yet available.
Strong domestic demand fueled output growth, led by significant improvements in government spending and household consumption. The third quarter saw public sector performance improve by leaps and bounds, with government final consumption expenditure increasing from 3.9 percent to 17.4 percent. For the first nine months alone, the average government final consumption expenditure had already reached 7.2 percent, a lofty leap from last year’s contraction of 0.2 for the same period, and a 2014 full-year rate of 1.7 percent. This simply shows that the government is successful in its efforts to overcome the spending bottlenecks that hampered growth in the first semester.
Meanwhile, with availability of more jobs, increasing employment and income, low inflation and inflow of overseas Filipino remittances, household consumption also grew by 6.3 percent. Filipino households increased their spending in the third quarter mostly on food and non-alcoholic beverages, miscellaneous goods and services, transport, restaurants and hotels, and communication.
Likewise, both public and private sector investments remained strong as capital formation rose to 8.9 percent, from the 0.2 percent contraction in the same period last year. This is largely supported by public construction which doubled from 20.6 in the previous quarter to 41.2 percent. Not far behind are private investments in durable equipment at 12.1 percent which showed strong business confidence in the country, amid slowdowns among Asian economies.
However, with the global economy still weak, the country recorded a 58.8-billion-peso trade deficit, a reversal from the 7.3-billion surplus last year. As a result, net exports plunged by 906.4 percent.
On the supply side, growth was driven by the services sector, which grew by 7.3 percent, with major contributions coming from trade, real estate, renting, and business activities or RERBA, and other services, particularly education, recreational activities, and hotels and restaurants.
With the setback in private construction, the industry sector also grew slower, albeit an improvement in manufacturing which remained as the sector’s major growth driver. The slowdown in the construction came after five consecutive quarters of double-digit growth, hence, this may just be part of the cycle of the sector.
The modest growth of the agriculture sector, on the other hand, shows the impact of El Niño, as yields and harvests for palay and sugarcane were most affected due to inadequacy of irrigation water and rain. The slight improvement in the sector’s performance is largely contributed by stronger growth in livestock, poultry, and fishery subsectors.
On trade, imports of goods and services have been robust at 13.5 percent compared to last year’s 4.7 percent. This is especially supported by increase in the importation of capital goods, and raw materials and intermediate goods, which grew at an average of 16.7 and 12.3 percent respectively, in the past nine months. These are expected to translate to more outputs in the fourth quarter and beyond, which will set the stage for the improvement of our exports by next year, given the US recovery and stimulus spending in Japan and other emerging economies like China.
This growth trajectory we are seeing will likely continue in the fourth quarter as we expect domestic demand to still pick up during the holiday season. This, along with low inflation, low oil prices, and the anticipated effects of election spending on the country’s growth, supports this outlook. Moreover, the services sector will remain strong and investments are likely to go up due to the expected increase in disbursements.
However, some risks still remain that may impede our growth potential. One is the still lingering effects of El Niño on the economy, especially for agriculture. The government has been taking measures to mitigate the impact particularly on food security and potable water supply. Another risk would be the uncertainties that are naturally brought about by an impending change of leadership, with next year’s national elections. We need to remain focused on ensuring that the economy is on the right path as political changes take place.
Nonetheless, the third quarter performance and the expected acceleration of growth in the last quarter of 2015 support our optimism for continued growth in 2016.
What is important is that we do not lose sight of our goals, and we know the factors that have been holding back the economy from reaching its full potential. We know that we need to continue and further deepen governance reforms and that we need to keep pushing for greater investments particularly in infrastructure and human capital development for the country to achieve rapid and inclusive growth in the medium and long-term. As we have been saying, good governance coupled with good economics will make for good-quality growth.
With sound fundamentals built from relentless pursuit of governance and economic reforms, we are optimistic that the new administration will not find it difficult to traverse an even higher growth path. The economy has yet to reach its peak and full potential. We need to further speed up infrastructure development that has been neglected for so long. This would not only buoy domestic demand but also enhance our global competitiveness as we prepare for the economic recovery of the advanced economies, the resurgence of international trade, and the integration of ASEAN economies. Infrastructure and social development will entail still more government budget and even more public-private partnership for infrastructure. Our recent experience on infrastructure spending has shown us that it is not enough to just increase the financial resources for infrastructure, it also requires improving our bureaucratic systems so that there is ample absorptive capacity.
More investments are needed in research and development and technology to enable the agriculture, industry, and services sectors to develop significantly. We need to innovate more with respect to technology and even business processes to connect the micro, small, and medium enterprises to the global supply and value chains for them to take advantage of growth opportunities. We need to significantly improve the country’s human capital to enable our current and future workforce to seize development opportunities here and abroad now and in the future. And a lot has to be done to generate more and better jobs and to improve the overall welfare of the Filipino families.
We hope that our future leaders will also pay attention to our development history, from which a lot has already been learned. The past five years have been devoted to translating the lessons learned into concrete strategies and actions. As long as we maintain our vigilance in providing and implementing solutions to our country’s growth constraints, we can achieve much more than what has already been accomplished. Through this mindset, we can ensure that our development priorities will still be focused on providing what’s best for Filipinos.
Salamat at mabuhay tayong lahat!