EMMANUEL F. ESGUERRA
Socioeconomic Planning Secretary
Press Conference on the 2016 Q1 Performance of the Philippine Economy
Destiny Function Room, Elements at Eton Centris Building, EDSA, Quezon City
19 May 2016, 10:00 AM
Ladies and gentlemen, members of the media, colleagues in government, good morning.
The 6.9-percent growth in the first quarter of 2016 showed the continuing high-growth trajectory of our country’s economy. The growth is above market expectations given average consensus forecast of 6.6 percent for the first quarter. This robust performance of the economy increases the likelihood of achieving the official GDP growth projection of 6.8 to 7.8 percent for full-year 2016, despite the weak agriculture and fishery sector. Also, among 11 selected Asian economies that have already released their growth data for the quarter, the Philippines was the fastest-growing economy, followed by China at 6.7 percent, Vietnam at 5.5 percent, Indonesia at 4.9 percent, and Malaysia at 4.2 percent.
We are pleased to be turning over a strong and stable economy onto the next administration. We have achieved significant socioeconomic progress over the last five years with the return of political and economic stability, which we hope the incoming administration will build on. We should not miss the current second wave of foreign investments into the region, especially now that we have finally become an investment destination of choice. It must be noted that part of the reason the Philippines was left behind economically by its neighbors is that the Philippines was largely ignored by the first wave of foreign investments into the region during the mid-1980s due to political instability. Therefore, it is important to demonstrate that our democratic institutions are mature enough to withstand political transitions. That the country was able to hold a generally peaceful and credible elections — aided by active citizen engagement and leading to wide public acceptance of the results — is a strong indication of much improved democratic institutions. We also have to underscore the need for policy consistency, which is important for sustained business confidence. Also, agreeing on a long-term vision for the country would help ensure that policy decisions are coherent, consistent, and on the right track towards realizing people’s aspirations even as political leaders change. We hope that our country will continue and improve the gains of the economy in the years to come.
Allow me to highlight a few points on the performance of the economy in the first quarter of this year. On the demand side, growth was investment-driven, with significant contribution from investments in durable equipment. Fixed capital, which is a better indicator of investment growth, registered a 25.5 percent growth and contributed 5.8 percentage points to real GDP growth. Construction also grew faster at 12 percent during the period, compared with 7.6 percent in the last quarter of 2015 and 4.5 percent in the first quarter of 2015. Public construction saw a reversal of its 23-percent contraction last year to 39.9 percent in the first quarter of 2016 as capital outlays of big departments posted significant increases. Private construction also picked up by 7.1 percent, from only 1.1 percent last year. All these investments give us confidence that the economy will continue to perform well in the succeeding quarters of the year and beyond.
In contrast, external demand weakened, with growth of exports of goods and services slowing down to 6.6 percent. However, imports of goods rose to 15.9 percent largely due to increased purchases of capital goods, which again is an indication that firms are investing. Services imports remained strong at 17.5 percent, significantly higher than the 8.9 percent last year.
On the supply side, the acceleration of economic growth was fairly broad-based. The high growth recorded for the first quarter of this year was driven by gains in the industry and services sectors. The industry sector recorded a growth of 8.7-percent, the highest in five consecutive quarters, supported by manufacturing, construction, and utilities. Also, the services sector recorded a 7.9-percent growth, on the back of faster growth in trade, finance, and real estate, renting and business activities. The strength of both the industry and services sectors once again shows the ongoing structural transformation taking place in our economy, which is crucial for sustaining economic growth and generating quality jobs.
But while our economy continues to traverse a high growth trajectory during the first quarter of the year, the agriculture sector remains a poor performer. For the first quarter of 2016, the agriculture sector contracted by 4.4 percent, coming from almost stagnation the past year. Admittedly, the sector remains vulnerable to extreme weather events. These past two quarters, it was the impact of El Niño that considerably reduced agricultural output, similar to the 1998 episode. But we have shown that this need not result in a spike in food prices with good management of the food stock.
While we have successfully prevented the spillover of the impact of El Niño to the rest of the economy, the fact remains that agricultural output has declined and, perhaps, so with the income of households that depend on agriculture for their livelihood. The more pressing need, therefore, is to build socioeconomic resiliency of individuals and communities. This can be done through productivity improvements, crop and income diversification, disaster preparedness, social protection, access to saving instruments and social insurance programs.
We must continually increase public spending on infrastructure, specifically in the transport and logistics sector, given its immense role in the all sectors, but especially agriculture. The development of a seamless multi-modal transport network as well as improving logistics such as storage and handling mechanisms will enable a more cost-efficient movement of goods and services across regions. Investments in shared services and facilities, research and development and the use of modern technology will also be important in modernizing agricultural production and increasing resiliency to disasters. With higher quality and volume and wider variety of agricultural products, the agricultural sector can gain access to larger markets locally and even abroad.
Overall, the growth prospect of our economy for the next quarters is encouraging. Growth in the second quarter of an election year is usually stronger than in the first quarter. Barring a significant drop in business confidence in the second half, the economy seems to be on track in meeting the full-year target of 6.8 to 7.8 percent. Business expectations, shown by BSP’s latest business confidence index, remain optimistic and are higher in the second quarter. Within the near-term, strong domestic demand is expected to support economic growth, offsetting the possible downward pressure coming from weak global output. Manufacturing is seen to retain its momentum given the country’s strong consumer base. The demand-side of the economy is expected to derive its vigor from household consumption given upbeat consumer sentiment and improving employment opportunities.
Notwithstanding, the government needs to be wary of the downside risks. In particular, the agriculture and fishery sector will continue to reel from the lingering impacts of El Nino though the transition to a normal weather condition is already happening. We should also start preparing for the La Nina which now has a 75 percent probability of occurrence.
Ultimately, the economic performance of our country from 2010 to the first quarter of 2016 remains the highest growth average recorded by the country that is backed by sound macroeconomic fundamentals. This is a testament to the good governance and equally good economic reforms that we have implemented since the beginning of the Aquino administration. This continuing high growth pattern should encourage all of us to continue working and making our own little contributions to the growth of the economy and higher well-being of our people.
These are exciting times ahead as this government will soon be turned over to a new presidency.
We are hopeful that the economic agenda of the incoming administration—that includes agricultural development, increasing infrastructure spending and expanding the government’s conditional cash transfer program, among others—will continue and build on the gains of the last five years.
The process of bringing the economy to a higher growth trajectory and significantly improving the quality of life of the people takes many years. There is so much more to be done. It is always important to take a long-term perspective even as we respond to short- and medium-term needs and challenges. NEDA has already initiated the process of long-term visioning, starting with knowing the people’s aspirations for the next 25 years. We intend to use this as a guide for medium-term development planning across administrations. Let me end with this vision statement, drawn from the people’s long-term vision for the country:
“By 2040, the Philippines shall be a country where all citizens are free from hunger and poverty, have equal opportunities, enabled by fair and just society that is governed with order and unity. A nation where families live together, thriving in vibrant, culturally diverse, and resilient communities.”
May we all do our share in making this vision a reality.
Salamat at mabuhay tayong lahat.