Economy slows down for third straight quarter

Aquino administration shrugs off sluggish growth brought about by weak public spending and declining exports

THE economy slowed for the third consecutive quarter in the quarter through September, to 3.2 percent from 7.3-percent last year, dragged down by declining exports, weak public spending and low agriculture output due to typhoon Pedring.

As a result, the gross domestic product expanded by only 3.6 percent in the first three quarters from 8.2 percent a year ago, according to the latest data from the National Statistical Coordination Board.

The slower third-quarter GDP growth would make it difficult for the government to hit its full-year target of 4.5 percent to 5.5 percent, Economic Planning Secretary Cayetano Paderanga Jr. said.

“If public and private construction will pick up in the fourth quarter, then we will have a fighting chance,” Paderanga said.

He said the central bank, which was set to decide on borrowing costs this week, might consider easing its policy rate to spur borrowing.

The Aquino administration shrugged off the slow economic growth, saying the effects of a P72-billion stimulus package approved last month would be reflected in the fourth-quarter gross domestic product.

Deputy presidential spokeswoman Abigail Valte said the debt problem in Europe and the United States’ economic woes had “spillover effects” in the country.

“We would all want to see higher growth, but our economy does not exist in a vacuum,” she said.

The Philippines’ third-quarter performance lagged behind Indonesia’s 6.5-percent, Vietnam’s 6.1 percent, Singapore’s 6.1 percent, Malaysia’s 5.8 percent, and Thailand’s 3.5 percent. It was also below the 4.6-percent consensus forecast of international and local analysts and the National Economic and Development Authority’s 3.8-to-4.8-percent forecast.

“The so-called death spiral of debt that hounds our trading partners, the un-invigorating, albeit already expanded government spending, and the decline in fishing due to unfavorable weather and the high cost of fuel contributed to this relatively lethargic growth,” said Romulo Virola, secretary-general of the National Statistical Coordination Board.

The services sector saved the economy from posting an even lower growth, recording a 1.2-percent expansion in the third quarter after growing 2.8 percent in the second quarter.

The agriculture, hunting and forestry, and fishery sector declined 3.9 percent, while industry rebounded to 0.3 percent from a 4.2- percent decline in the previous quarter.

On the demand side, consumer spending bolstered growth but construction continued to suffer from the long-delayed implementation of the government’s public-private partnership program.

Construction went down by 10.6 percent, led by public construction which plunged by 21.3 percent, and private construction which contracted by 7.8 percent. Public construction has been on a consistent decline since June last year.

The export slowdown also dragged down growth. Exports tumbled the most in 29 months in September, with shipments sliding 27 percent from a year earlier. Overseas sales are equivalent to about 30 percent of the economy.

Easing growth has prompted companies, including Philippine Long Distance Telephone Co., to cut profit forecasts for this year as consumers cut back on spending. Ginebra San Miguel Inc. reported a third consecutive loss last quarter after revenue declined.

The peso has fallen more than 2 percent this month, declining along with Asian currencies as Europe’s worsening crisis roils global financial markets and prompts investors to shun emerging-market assets. The Philippine Stock Exchange Index fell 6.8 percent last quarter and slid 0.8 percent on Monday.

An analyst on Monday urged the House-Senate bicameral conference committee to make final adjustments to next year’s budget to make it more responsive to reality because the government based its macro-economic assumptions on stronger economic growth in the first quarter this year.

Economics professor Leonor Briones said the national budget was “not responsive to the realities” here and abroad.

House Speaker Feliciano Belmonte Jr. said the House and Senate could ratify the budget “as is,” but the adjustments could be made on the spending side.

Meanwhile, senators and congressmen on Monday removed the special provision in the P1.816-trillion budget mandating that the Judiciary exlusively use its P1.8-billion hiring fund to fill unfilled positions.

A source said the Judiciary, which had been opposing that provision, may now treat that fund as pork barrel that it might earmark for bonuses and other expenditures, as before.

“It seems that senators and congressmen have succumbed to the strong pressure from the Judiciary, the source said. With Christine F. Herrera, Maricel Cruz and Bloomberg, Elaine Ramos Alanguilan and Joyce Pangco Pañares