ERNESTO M. PERNIA
Socioeconomic Planning Secretary
Press Conference on the Performance of the Philippine Economy
for First Quarter 2017
May 18, 2017; 10:00 am
Astoria Plaza, Ortigas Center
The Philippines remains one of the strongest performers among major emerging economies in Asia. It grew 6.4 percent in the first quarter of 2017, overtaking both Vietnam’s and Indonesia’s 5.1-percent growth, and Thailand’s 3.3-percent. We are only second to China’s 6.9-percent growth while India has not yet released their data.
Our first quarter performance bodes well for the economy as it is broadly in line with this year’s government target of 6.5-7.5-percent. It is, however, lower than desiredly expected, and this may be explained by the base effects. That is, growth last year was high due to election spending, the impact of which has already dissipated.
Also, the changing of the guards of the administration and reorientation of programs typically take some time to settle, and this slowed government spending for the quarter. Note, however, that this was better than during the previous administration where government consumption spending and public construction contracted by about 15 percent and 37 percent, respectively. Of course, this could also mean that we have benefitted from the reforms put in place by the previous administration. This further demonstrates the strategy of the Duterte administration, which is to sustain good practices, and improve upon or correct those that require improvement.
On the demand or expenditure side, the economy remained strong, even with the slowdown in household spending and capital formation. With improving global demand, growth in exports was robust. Exports of goods grew by 22.3 percent, the fastest since the third quarter of 2010. And exports of services grew steadily by 14.3 percent in the first quarter of the year.
On the supply side, agriculture made a great comeback with 4.9-percent growth after several quarters of decline. The services sector continued to be the main driver of growth, growing 6.8 percent. The 6.1-percent growth in industry also remained respectable with the boost provided by manufacturing, although tempered by the slowdown in construction and utilities, and decline in mining and quarrying production.
Moving forward, the domestic economy is poised to maintain its growth momentum with the recovery of external trade and private sector’s steadfast optimism. The government has also been busy laying down a strong foundation for sustainable and equitable growth with an ambitious infrastructure program. This is among the many other reforms and programs contained in the Philippine Development Plan 2017-2022.
It is important to ensure that government spending for both consumption and investment remains within the fiscal program, which is critical to sustain the growth momentum. With the steady unfolding of the Build Build Build program in the coming months, we expect construction activities and public spending to pick up sharply, consistent with the government’s aim to spend 5.3 percent of GDP this year for infrastructure and up to 7.4 percent by 2022.
But we remain on the lookout for external downside risks that may include market volatility from continuing U.S. interest rate normalisation, geopolitical tensions in various regions, and the possible rise of protectionist sentiments especially in Western countries.
We also have to remain cautious and stand ready to take measures to counter the potential effects of El Niño. This may include continuous production support, timely importation, and the distribution of seeds.
We also need to ensure that inflation will remain under control for the next three quarters and beyond to keep demand strong.
Likewise, to sustain the growth momentum of exports, it is important to ease government regulation, strengthen market intelligence gathering with the help of the private sector. We also need to maximize the benefits of trade agreements and economic groupings, especially with our ASEAN neighbors.
We are off to a good start. We aim to gain a strong footing in the succeeding quarters as we move forward with plans and programs included in the PDP. This will be formally launched – to be led by the President – on June 2, 2017 at the SMX Convention Center. We are inviting all of you to join us in the event.
We aim to follow through and be resolute to finish strong and well within our targets.
Thank you and have a good day!