PH GDP growth slows to 3-year low: 5.2% in Q1 2015

(4th UPDATE) The Philippines’ first quarter gross domestic product growth is below government and market expectations

MANILA, Philippines (4th UPDATE) – The government announced on Thursday, May 28, that the Philippine economy grew by 5.2% in the first quarter of 2015 – the lowest in 3 years – as government spending stays weak and exports decline.

The first quarter growth is lower than the 5.6% growth of the gross domestic product (GDP) in the same period last year, and down from 6.6% in the fourth quarter of 2014. It is the lowest since the 3.8% growth recorded in 2011.

Economic Planning Secretary Arsenio M. Balisacan said in a news briefing that the first quarter growth figure is “lower than what the government and the market expected for the period.”

“While growth in the private sector remains robust, the slower-than-programmed pace of public spending, particularly the decline in public construction, has slowed down the overall growth of the economy,” said Balisacan, who is National Economic and Development Authority (NEDA) chief.

“Drop in public construction spending was due to delays in some projects of government agencies,” Balisacan said.

Public construction spending dropped to P56.27 billion ($1.26 billion), or 24.6% lower than the recorded P73.93 billion ($1.65 billion) in the same period last year. The overall construction sub-sector was able to grow last quarter due to the increased private construction spending of P279.26 billion ($6.25 billion) from last year’s P240.61 billion ($5.39 billion).

He added, however, that “the recent uptick in disbursements from the Department of Budget and Management (DBM) has not yet been reflected in the national income accounts.”

Balisacan said that the 4.8% growth in public consumption in the first quarter is “much faster” than in the same period last year.

“[This is] driven by the 19.2% increase in disbursements for maintenance and other operating expenses primarily on social protection programs, bottom-up budgeting projects, and the country’s hosting of the Asia-Pacific Economic Cooperation meetings,” he said.

‘Higher growth in remaining quarters’

Balisacan expressed confidence that the economy will grow faster for the rest of the year, citing the “vibrant” economic activity of the private sector.

“Despite this lower-than-expected growth, it is reasonable to believe that the economy will grow at a faster rate in the remaining quarters,” he said.

The NEDA chief said that private construction registered a double-digit rise of 14.2% in the first quarter, while private investments in durable equipment rose by 14.3%. He added that the latest business confidence index from the Bangko Sentral ng Pilipinas “shows that next quarter confidence index climbed to 58.2% from 43.1% in the previous survey.”

He said growth in household consumption “remains steady” at 5.4%.

“Based on the first quarter 2015 Consumer Expectation Survey, consumer sentiment improved in the quarter due to expectations of stable price of commodities, decline in oil prices, availability of more jobs, higher number of employed family members, and fewer calamities during the period, among others,” Balisacan said.

He added: “These clearly indicate that business and consumer confidence on the economy is still very high and is supportive of our optimism in hitting our growth targets for 2015.”

Faster gov’t spending; increased exports

He cited the latest DBM report on the government’s disbursement performance for the first quarter, which shows a “trend” toward faster government spending.

“If this disbursement trajectory is sustained and reflected in all government agencies, the higher government spending will fuel even more activities in the private sector, and thus push economic growth in the next quarters of the year,” Balisacan said.

Data from the Department of Finance showed that government spending of P504 billion ($1.2 billion) during last quarter was 13% below target, even if it grew by 4.8% from the same period last year.

Meanwhile, export growth decelerated to 2.1% in March, from 12.1% in the same month last year, according to the latest data from the National Statistics Office.

“These are elements largely within our control; these are opportunities we intend to capitalize on in the next quarters. Numbers fluctuate each quarter but they clearly show an unmistakable positive trajectory. We are less concerned about the quarterly numbers game than getting the foundations of our growth right,” Finance Secretary Cesar Purisima said in a statement.

Balisacan said, “We are hopeful that exports will pick up in the next quarters.”

Balisacan also said the first quarter figure points to “issues that the government needs to confront in order to maintain the high level of confidence that the business sector is showing and entrusting the country.”

“Therefore, we are keeping a careful watch over the spending performance of the agencies to ensure that implementation bottlenecks are being addressed and the execution of programs and projects will not be further delayed,” the NEDA chief said.

He expressed hope that the “effective facilitation” of government programs on poverty reduction and job generation will help it meet its growth targets until the end of the Aquino administration.

“Even if we end up with a 7% GDP growth for the whole year, we will still be one of the fastest growing economies in Asia,” Balisacan said.

The Philippine Stock Exchange Index was down following the announcement of the lower-than-expected GDP growth. The PSEi was down 1.27% at 7,502.19 in mid-morning trade.

Full-year growth target still attainable

Despite the letdown in the first quarter, Balisacan said the government is keeping its full-year target of 7% to 8% as it expects faster government spending in the remaining quarters.

He said, however, that the economy should hit an average growth of 7.5% in the next 3 quarters to meet its full-year target.

“That’s (full-year growth target) not impossible, especially now that the conditions in terms of macroeconomic fundamentals are good,” he said.

Balisacan said that the “missed opportunity” to achieve higher growth in the first quarter “is not totally foregone as we still expect public spending to pick up for the rest of the year.” – with reports from Chrisee de la Paz, Agence France-Presse / Rappler.com