MANILA, Philippines – With a growth trajectory that has been uninterrupted for 17 years and a robust economic growth average in the past six years, the Philippines has gotten out of the boom-and-bust cycle and is now traversing a “higher growth path,” said Socioeconomic Planning Secretary Ernesto Pernia.
In a presentation during the general membership meeting of the Chamber of Thrift Banks on Thursday, Pernia said the average growth rate of 6.2 percent in the last six years has been the highest since the 1970s.
“In earlier years, the Philippine economy was known to go through a boom-and-bust growth cycle. However, in recent years, the country has proven to get out of this cycle as we have been experiencing sustained high growth,” he said.
In the second quarter of 2016, the country’s gross domestic product (GDP) accelerated to seven percent, faster than the previous quarter’s growth rate of 6.8 percent and 5.9 percent in the second quarter of 2015. With the first semester growth rate of 6.9 percent, the economy only needs to grow by 5.1 percent in the second semester to reach the lower end of the government’s growth target of 6.7 percent for 2016.
Pernia said the low inflation in recent years fueled the expansion of the economy. In 2015, headline inflation rose by only 1.4 percent on the average.
This was mainly due to the deceleration of non-food commodity prices such us housing, water, electricity and gas. Year-to-date headline inflation averaged 1.4 percent ending in July.
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This favorable macroeconomic performance, Pernia said, has allowed for the country’s GDP per capita to grow at an average of 4.3 percent annually in the past six years. As of 2015, the country’s GDP per capita stands at P74,770, up by 4.15 percent year-on-year.
“The second quarter GDP growth puts the country as perhaps the fastest-growing economy in Asia. And for the full year 2016 and until 2017, the Philippines is expected to remain as one of the fastest growing economies in Asia,” he said.
The Cabinet official said growth would continue to be driven by strong household consumption supported by remittance inflows, increased public spending on infrastructure, improved employment prospects, low inflation and low interest rates.
Low petroleum prices could also encourage expansion of existing firms and even result to the entry of new companies.
However, within the immediate term, the country must remain vigilant of downside risks to our growth prospects, said Pernia.
On the external front, economic managers are monitoring the fragile growth in Japan and the European Union, and the slowdown in large emerging economies, particularly China.
“We will also continuously monitor the monetary policies in the major developed economies and the knock-on effects of the Brexit. Geopolitical tensions in the Middle East and the extended period of low oil prices could also affect OFW jobs and remittances. There is also the maritime dispute in the West Philippine Sea,” said Pernia.
On the domestic front, logistics bottlenecks could constrain economic activity.
Delays in the roll out and implementation of government infrastructure and reconstruction projects would also delay regional development and recovery in disaster-stricken areas.
“Weather shocks, including a potential La Niña towards the end of the year, could work both ways – it could increase agricultural production but could also result in floods in urban areas,” said Pernia.
Closure of mines, while having minimal impact on economic growth, could also adversely affect the economy as a significant numbers of workers could be displaced.
