PHL economy falters to 5.3%, down to fourth fastest in Q3 in Asia

(Updated 10:51 a.m.) Philippine output grew at a slower 5.3 percent in the third quarter, knocked down by typhoons and supposedly an adverse Supreme Court decision on government spending to fourth place among the economies of Asia, the Philippine Statistics Authority (PSA) said on Thursday.

The Philippines is now the fourth fastest growing economy next to China, Vietnam and Malaysia, Socioeconomic Secretary Arsenio Balisacan said in a briefing in Makati City Thursday.

In the second quarter, the Philippines matched the growth rate of Malaysia as the second fastest in Asia next to China.

“The third quarter economic performance shows a mixed picture of the private sector treading a more stable upward trajectory, government adjusting to new spending protocols, and then, the lingering negative impact of typhoon Yolanda and other calamities,” he said.

The third quarter gross domestic product was slower than the actual 6.4 percent in the second quarter, coming from 6.9 percent a year earlier.

Contracting by 2.7 percent, the biggest decline was observed in the agriculture, fishery and forestry sector , Balisacan said.

The losses registered in subsectors of palay, corn, coconut including copra were the adverse impact of Typhoons Glenda and Luis, the onset of habagat, as well as the lingering effects of killer Typhoon Yolanda.

The latest growth rate was also slower than the median estimate of 6.28 percent from a poll of five analysts and economists polled by GMA News Online.

The actual 6.4 percent growth in the second quarter was confirmed on Wednesday by the PSA.

Slow government spending

In an e-mailed statement, Department of Budget and Management secretary Butch Abad blamed the “uncertainties” after the Supreme Court struck parts of the Disbursement Acceleration Program (DAP) as unconstitutional.

“[The] ruling may have sent a chilling effect across the bureaucracy’s expenditure practices,” Abad said.

In July, the High Court voted unanimously to strike down as unconstitutional specific acts under the controversial DAP. These acts include the realignment of slow-moving allocations before the end of the year

Following this development, President Benigno Aquino III urged Congress during his State of the Nation Address to pass a supplemental budget for 2014 to ensure the continuity of projects funded by DAP.

In a research note, ING Bank N.V. senior economist Joey Cuyegkeng said the DC’s anti-DAP ruling contributes to the weak spending growth.

“Government seems stumped as to make catch up with the execution of this year’s fiscal program and as to make the process more efficient. But there could be other reasons that may be necessary to ensure a graft-free implementation of projects and programs,” he noted.

Abad also cited the budget reforms put in place by the department in line with the transparency thrust of the Aquino administration. Among these measure are increased the requirements that agencies and departments had to comply with before their funds could be released.

Port congestion

Balisacan noted the “chilling effect” of the port congestion in Manila, particularly on food prices.

“If supply has been restrained by this slowdown in imports, that could have aggravated prices,” he said, noting how the situation has tempered consumption.

Only in mid-September was the daytime truck ban in the City of Manila lifted. The ban imposed by City Hall was supposedly intended as to ease traffic. Instead, it further constricted the flow of cargo from the ports of Manila and was blamed by the national government for aggravating the slow movement of goods in and out of container port terminals.

“Were putting up a permanent solution for this to ramp up infrastructure spending… and making decision and starting that long process of putting up roads, ports and airports, even providing good economic climate so new business districts will rise outside Metro Manila… so it won’t be so congested,” he added.

The Cabinet official also cited the contraction in public construction to -6.2 percent from a double digit growth of 19.1 percent.

“Most of the delays were due to lags in the submission of documentary requirements by the concerned agencies,” he said.

Growth target at risk

The latest GDP data placed the nine-month average to 5.8 percent, making it hard for output to hit even the lower end of government’s growth target of 6.5 to 7.5 percent.

“We need to grow by at least 8.2 percent in the fourth quarter, and we in the DBCC will brainstorm intensively on how we can come as close to this figure as possible,” Balisacan said.

Still, he is looking at the brighter side of economic prospects for the Philippines.

“We expect the private sector to maintain a robust performance. Government will have adjusted to the new protocols and we see this in the most recent, though preliminary data coming from DBM,” he said.

Resilience

The reconstruction assistance in the Yolanda-affected areas is already gaining traction.

“We are also taking stock of the lessons here: agencies will have to be adequately prepared and capacitated to comply with new protocols.

“And more importantly, we need to improve our resilience against disasters – through better preparedness, through adaptation, through adequate social protection and through having a faster response mechanism,” Balisacan said. —KG/VS/NB, GMA News