Delivered by Director Reynaldo Cancio, NEDA National Policy and Planning Staff

Press Conference on the 2016 Q3 Performance of the Philippine Economy

The Heritage Hotel, Manila

November 17, 2016

Good morning, ladies and gentlemen, and all of media present today. We are pleased that the Philippine economy has hit its stride in the third quarter growing strongly by 7.1 percent. This cements our chance of achieving our target of 6.0 to 7.0 percent for the whole of 2016. This growth is above the median market expectation of 6.8 percent. And we are the fastest-growing among major Asian emerging economies that have already released data for the quarter. We are higher than China’s 6.7 percent, Vietnam’s 6.4 percent, Indonesia’s 5.0 percent, and Malaysia’s 4.3 percent. India’s has not yet released their data. For the fourth quarter, the country only needs to attain at least 3.4 percent growth to attain the low-end target of 6.0 percent. To reach the high-end target of 7.0 percent, we need to grow by 6.9 percent in the fourth quarter.

From the demand side, investments continue to drive this economic growth, indicating its sustainability. Growth in investments for durable equipment remained strong. Private sector investments in construction grew significantly by 16.2 percent this quarter from last year’s 4.0 percent. Public investment in infrastructure remained strong, with public construction expanding by over 20 percent for the third quarter. Household consumption also remains a pillar of strength for the domestic economy. With upbeat consumer confidence and as households prioritized enrolment expenses, private consumption grew by 7.3 percent, higher than last year’s 6.1 percent. The higher private consumption is also supported by low inflation, low interest rates, better labor market conditions and the steady, though slower growth in overseas Filipinos’ personal remittance. Government assistance such as the Pantawid Pamilyang Pilipino Program, or 4Ps, also provided additional boost to consumer demand. External demand likewise improved, with growth in exports of goods steadily rising to 7.8 percent.

From the supply or production side, we are happy to note the recovery signs of agriculture, which is one of the major development priorities of this administration. With the normalization of weather conditions, agriculture grew by 2.9 percent, breaking five consecutive quarters of decline. It has recovered from the prolonged drought brought by the El Nino phenomenon, which already dissipated in the third quarter of 2016.

Industry growth further improved to 8.6 percent, growth in manufacturing and construction was also stronger, while utilities was broadly steady. However, services growth eased to 6.9 percent from last quarter and a year ago. Services saw slower, though still reasonable, growth. Expansion in the retail trade, repair of motor vehicle, wholesale and retail and communications subsectors grew strongly.  The slowdown in the communications subsector, however, could be temporary as the two large telcos went into a buyout deal with San Miguel Corporation over its control of specific frequencies.   Public administration, though expanding by 3.7 percent, slowed down compared to the previous quarters due to the waning effects of election spending.

All things considered, our economy’s strong growth in the third quarter is a very good sign of things to come. Together with a low inflation environment, a sustained strong growth bodes well for continued poverty reduction this year. The services sector and the sustained strong fiscal spending will also likely continue to drive growth in the fourth quarter. Robust domestic demand will continue to bolster growth in the near-term. For the first three quarters, the domestic demand already posted an 11.2 percent growth, and for the third quarter alone, it stood at 9.8 percent. We see this momentum to continue in the fourth quarter of the year. Meanwhile, agriculture and fisheries will likely continue to grow within the near term if the third quarter momentum of the crops, livestock and poultry subsectors is maintained. The expiry of the quantitative restrictions on rice by mid-2017 is an important opportunity to reduce the cost of rice, which eats up 20 percent of the budget of the poor.  At the same time, it is important to assist the agricultural sector to transition to higher value crops and strengthen agro-industrial linkages. While agriculture has recovered somewhat, we still have a long way to go for this sector.  The objective is to reduce the vulnerability of the sector to natural calamities. The Philippine Development Plan 2017-2022 will also prioritize diversification and value-adding strategies consistent with the 0 to 10-point Socioeconomic Agenda.

Meanwhile, the manufacturing sector is expected to benefit from the strategic localization of industry roadmaps and robust domestic demand. It will also benefit from the projected rise of imports of both advanced economies and emerging market and developing economies beginning 2017. Construction also will remain a major contributor to growth due to the strong commitment of the government to implement a massive infrastructure investment program.

However, we are still on guard for possible downside risks to the economy. Agriculture and fishery remains vulnerable to the possible occurrence of La Niña. Second, despite the uptick in exports, the outlook is clouded by sluggish recovery in Europe and uncertainties in economic policies in the UK and US. Third, the resurgence of the “Saudization” policy — or the replacement of foreign workers with Saudi nationals — is perceived as an emerging concern. Fourth, while peace talks between the government and various rebel groups are ongoing, there is a need to consolidate efforts that will pave the way for lasting peace and development in the countryside.

Ultimately, what we should be concerned about is how the growth prospects for this year and beyond will translate to poverty reduction and improvements in the quality of life of Filipinos for the next six years. As we have seen from our experience over the last three years, sustained strong growth, underpinned by economic and political stability and accompanied by sound social programs, is essential in this regard. The implementation of the RPRH Law will also be of help. The official adoption, through Executive Order No. 5, of Ambisyon Natin 2040 as guide for development planning across administrations is an important step towards greater policy coherence horizontally, vertically and inter-temporally. The long-term vision of the country will be enshrined in the Philippine Development Plan (PDP) 2017-2022, which is currently being formulated and designed to lay down a strong foundation for a prosperous and high-trust society and a globally competitive knowledge economy.

We are hopeful that the trajectory of our country’s growth will remain high in the face of the challenges ahead of us. The government and the private sector have to take every opportunity that this growth brings to improve the lives of our countrymen, especially to eliminate poverty and create quality jobs and entrepreneurial opportunities. We have to empower more Filipinos, especially the marginalized groups, to participate in and benefit from the development process. This will result in genuine inclusive growth for our nation — one that enables every Filipino family to enjoy a “matatag, maginhawa at panatag na buhay”. Salamat at mabuhay tayong lahat.