Slowest quarterly GDP growth: P47B in output lost, household spending falls
MANILA, Philippines—The Philippine gross domestic product (GDP) slowing down for three consecutive quarters is an indication of an “economic decline,” the think tank Ibon Foundation said.
As the Philippine Statistics Authority (PSA) announced, the GDP grew by 4.3 percent in the second quarter, slowing down from 7.5 percent a year ago and 6.4 percent in the first quarter of this year.
This, despite the assertion of President Ferdinand “Bongbong” Marcos Jr. on July 25 that the Philippines is still considered to be one of the fastest-growing economies in Asia and the world.
Ibon Foundation explained that “the economic rebound and momentarily fast growth from reopening, which was measured from the worst economic contraction in the country’s history, is over.”
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It pointed out on Friday (Aug. 11) that the economy has returned to its trajectory of slowing growth that started even before the government imposed excessive COVID-19 lockdowns in 2020.
According to PSA data, GDP has consistently slowed from 7.7 percent in the third quarter of 2022 to 7.1 percent in the last quarter, 6.4 percent in the first quarter of this year, then 4.3 percent in the second quarter, the slowest in over two years.
The slowdown brought the first semester expansion to 5.3 percent, lower than the 6 percent to 7 percent target for the year. But Socioeconomic Planning Secretary Arsenio Balisacan said “notwithstanding the challenges, we believe this is still attainable.”
But with GDP slowing for three consecutive quarters, billions of pesos worth of economic output had already been lost, economist Sonny Africa, executive director of Ibon Foundation, told INQUIRER.net via FB Messenger.
He explained that while the “quarterly magnitudes underlying these growth figures” are not comparable on a quarter-to-quarter basis because there is “seasonality,” like differences in economic activities, there is the Seasonally Adjusted National Accounts.
This, Africa said, “adjusts for this seasonality and adjusts for inflation.” He stressed that by using the data, growth figures, like for the first and second quarters, can be comparable.
Based on PSA data, the 6.4 percent in the first quarter translated to P5.178 trillion, while the 4.3 percent in the second quarter translated to P5.131 trillion, so when measured at constant 2018 prices, there was a P47.2 billion loss in economic output.
As Africa said, “we can see that, on a seasonally adjusted basis for comparability, the economy actually contracted by 0.9 percent between the first quarter and second quarter of this year.”
The think tank said growth is slowing most of all because depressed family incomes are dampening household consumption spending, which historically accounts for some three-fourths of the economy.
It pointed out that Household Final Consumption Expenditure (HFCE), which consists of expenses incurred by residential households on consumption of goods and services, “has been slowing down for five consecutive quarters.”
Based on PSA data, HCFE’s year-on-year growth was 5.5 percent in the second quarter, down from 8.5 percent a year ago, 8 percent in the third quarter, 7 percent in the last quarter of 2022, and 6.4 percent in the first quarter of this year.
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Ibon Foundation said “family incomes are depressed because agriculture and manufacturing, the most important source of steady and quality jobs, both slowed and their shares in GDP continue to shrink.”
The agriculture, forestry and fishing sector slowed to 0.2 percent in the second quarter of 2023 from 2.2 percent the quarter before. Meanwhile, manufacturing growth dropped to 1.2 percent from 1.9 percent over the same period.
“The contribution of agriculture to the economy has shrunk to its lowest level ever at 8 percent; manufacturing continues its decades-long decline and its 17.6 percent is lower than before the pandemic and as low as in the 1950s or seven decades ago,” Ibon said.
Low gov’t spending
As stressed by the think tank, government spending actually contracted by 7.1 percent in the second quarter, however, this has only historically accounted for less than 12 percent of the GDP.
Malacañang already said the administration “will accelerate spending in the coming quarters to recover the momentum following the 4.3 percent economic expansion of the country’s economy in the second quarter of this year.”
According to a joint statement from the country’s economic managers, the lack of election-related spending contributed to the contraction.
“While government expenditure contracted by 7.1 percent in the absence of election-related spending in the first half of the year, government spending will accelerate in the coming quarters to allow us to recover our growth momentum,” the statement read.
However, Ibon Foundation said “with growth slowing and the economy clearly losing momentum, the economic managers have lost their last indicator for claiming good economic performance.”
“Real recovery is nowhere in sight as long as the same old economic thinking persists,” said Ibon.
“The government’s claim that its 6 percent to 7 percent growth target for the year is still achievable is oblivious to worsening joblessness and poverty, declining agriculture and industry, and weaker exports and investments amid a global slowdown,” the think tank said.
“Its narrow-minded fiscal conservatism also prevents it from stimulating the economy with income assistance for households and boosting local agriculture and industry,” it added.