DUBAI: The Philippine economy grew slower during the third quarter, a fraction below official estimates, drawing government concern as weaker household consumption and consumer confidence were pointed out as the main culprits for the slowdown during the period.
Third-quarter gross domestic product (GDP) expansion was pegged at 6.1 percent, compared with 6.2 percent from the previous quarter and 7.2 percent of the same period in 2017. Philippine finance earlier estimated third-quarter GDP growth would be at 6.5 percent.
“We are concerned, because the reason for the slowdown, among others, is the slowdown in household consumption, particularly the marked slowdown in the household spending on food and other basic products,” Socioeconomic Planning Secretary Ernesto M. Pernia said the Philippine economy could have grown between 6.5 percent and 7 percent in the quarter if not for the unabated rise in consumer prices, which peaked at 6.7 percent in September. October figures released earlier this week indicated that inflation has plateaued at 6.7 percent.
Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines’ corporate research unit, told Arab News: “I expected a higher print with a supposed stronger government spending. However, inflation’s impact on consumption was seemingly stronger and agriculture output also took a big hit.”
“Fourth-quarter GDP, however, may recover on the back higher consumption brought by the season.”
Michael L. Ricafort of Rizal Commercial Banking Corporation also explained the higher inflation rates during the quarter reduced the purchasing power of consumers and business. “This partly caused the slower growth in consumer spending – which accounts for about 70 percent of the economy.”
Finance Secretary Carlos Dominguez III also said the latest inflation data indicated that “price pressures have started to ease as a result of monetary and non-monetary measures that the government has put in place to augment the supply of crucial food items.”
“The Philippine economy – growing at least 6 percent for 14 consecutive quarters – suggests that we are now on a higher growth trajectory … That is why we need to focus on building capacity in physical infrastructure, human capital, and financial capital,” Pernia meanwhile said. “We are not exactly exuberant about the 6.1 percent growth rate, but still comforted that we remain one of the fastest-growing economies in Asia, next to Vietnam at 7.0 percent, China at 6.5 percent, and way ahead of Indonesia at 5.2 percent.”
Pernia noted that while the slowdown in household spending was abatable and temporary, there must a stronger solution to particularly tackle food inflation.
“The more robust solution is to reform the legal framework surrounding agricultural development and agricultural trade, especially on rice and sugar,” he said, and urged legislators to pass the Rice Tariffication Bill. The proposed legislation, if passed, would reduce the prices of rice – a staple in Filipino diets – between 2 and 7 pesos per kilo and help enhance the productivity of farmers through its tariff revenues.
“Even as domestic demand is expected to return to high gear this fourth quarter due to the holiday season, we will continue addressing upward pressures on prices, especially on food,” Pernia said.