ECONOMIC GROWTH slowed drastically to just 3.2% in the third quarter, dragged down by a weak agriculture sector and a plunge in construction activity.
Government officials all but gave up on the full-year growth outlook, with Socioeconomic Planning Secretary Cayetano W. Paderanga, Jr. saying the expected 4.5-5.5% result would be “difficult to achieve.”
July-September growth was below the National Economic and Development Authority’s forecast of 3.8-4.8% as well as the 4.1% median in a BusinessWorld poll. It raised the prospect of a rate easing when the Monetary Board meets this Thursday.
Bangko Sentral ng Pilipinas Governor Amando M. Tetangco, Jr., in a text message, said: “Together with data on potential price pressures and other related domestic and external indicators, data on [growth] will serve as inputs to the assessment of monetary policy.”
The growth pace was also down considerably from last year’s 7.3%, but was better than the revised 3.1% for the second quarter, data from the National Statistical Coordination Board (NSCB) showed.
Second-quarter gross domestic product (GDP) growth was previously reported at 3.4%.
The economy has grown by only 3.6% since the start of the year, compared with 8.2% in January-September 2010.
“To attain the lower-end target of 4.5%, fourth-quarter GDP should grow by 6.9%. To attain the upper-end target of 5.5%, the fourth-quarter GDP should grow by 10.6%,” NSCB Secretary-General Romulo A. Virola said.
“The so-called death spiral of debt that hounds our trading partners, the uninvigorating, 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,” Mr. Virola added.
“As almost always, the service sector saved the domestic economy from posting an even lower growth.”
The service sector — which accounted for 44.5% of GDP — recorded the fastest growth rate of 5.3%.
Growth in farm output, meanwhile, slowed to 1.8% due to typhoon Pedring, while industry contracted by 0.2% — a reversal of last year’s 9.8% expansion.
Construction plunged by 12.2% while electricity, gas and water supply shrank by 1.0%. It was dragged down by both public and private construction — with their gross value added falling by 21.3% and 7.8%, respectively, in the third quarter.
Households hiked spending by 7.1%, while government final consumption expenditure grew by 9.4% amid calls to pump-prime the economy. Last year, state spending fell by 6.5%. The figure stood at 4.3% in the second quarter.
Mr. Paderanga said: “The typhoons that caused losses and damage in the agriculture sector, the global economic slowdown … contributed to the modest performance of the economy.”
By the NSCB’s estimates, agriculture output, minus the effect of typhoon Pedring which struck in late September, would have grown by 5.2%, while GDP growth would have been at 3.5% instead of 3.2%.
“Typhoon Pedring cost us about 0.3% of GDP,” Mr. Virola said.
The economy would have grown by 3.8% if construction growth during the period was zero instead of falling by 12.2%, he added.
Mr. Paderanga noted that Philippine growth was the weakest in the region. “In comparison with the Asian neighbors, the country’s third-quarter economic performance is weaker relative to Indonesia’s 6.5% growth, Vietnam’s 6.1%, Singapore’s 6.1%, Malaysia’s 5.8% and Thailand’s 3.5%.”
But the Cabinet official said he still expected a better fourth quarter due to increased government spending and an expected uptick in consumption. The government recently announced a P72-billion stimulus plan following weak second-quarter growth.
Mr. Paderanga’s hopefulness was echoed by Finance Secretary Cesar V. Purisima, who said the government would “continue to work harder to chart the country to a higher growth trajectory.”
Budget Secretary Florencio B. Abad, for his part, said: “It will now be a bigger challenge to reach our target, but we are trying to reach it.”
Finance Undersecretary Gil S. Beltran, in a text message, declared: “Yes, we can still meet the 4.5%-5.5% growth. We are still in a fighting mood.”
Analysts, however, said achieving the government target would be next to impossible.
“Most of the drag to growth this year has come from the Philippines’ exposure to external demand. Merchandise exports have contracted for five consecutive months… Services exports … also declined. Given China’s slowdown, Europe’s recession, and sluggish growth elsewhere, these trends will unlikely reverse anytime soon,” said Trinh D. Nguyen, regional economist at the Hongkong and Shanghai Banking Corp. (HSBC), in a research note.
The Monetary Board faces a tough decision during Thursday’s policy rate-setting meeting, the HSBC economist added.
University of the Philippines economist Benjamin E. Diokno said full-year growth would fall below 4%.
“[T]he economy now appears to be heading to another downgrade — plausibly a growth of between 3.3% to 3.9%,” Mr Diokno said.
University of Asia and the Pacific economist Peter Lee U said government pump-priming, particularly through infrastructure spending, was needed.
While the fourth quarter would be better, hitting the 5%-6% target for the entire year would be impossible, he said. “At this pace we’ll probably be lucky to hit 3.5%-4%,” Mr. U said.
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By: Karen Joyce Q. Ang with a report from Diane Claire J. Jiao
Source: Business World, Nov. 28, 2011
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