In first quarter
MANILA, Philippines — The Philippine economy expanded at a faster pace of 5.7 percent in the first quarter from 5.5 percent in the fourth quarter of 2023, helping the country retain its position as a leading force among emerging economies in Asia.
However, the first quarter gross domestic product (GDP) growth was slower than the 6.4-percent expansion in the same quarter last year.
In a press briefing, National Economic and Development Authority Secretary Arsenio Balisacan said the performance in the first quarter retains the country’s position as a leading force among Asia’s emerging economies, with the GDP growth rate about the same as Vietnam’s and above the growth in other major economies such as China’s 5.3 percent, Indonesia’s 5.1 percent and Malaysia’s 3.9 percent.
“From the start of the year, we have been experiencing several shocks, the major ones being the long period of the heatwave, and related to that, the El Niño and geopolitical tensions. Our first quarter economic performance is a testament to our people’s and industries’ resilience,” Balisacan said.
Despite the damage caused by El Niño, the agriculture sector still managed to record a 0.4-percent growth in the first quarter.
Other major economic sectors also posted year-on-year growth in the first quarter, with the industry sector growing by 5.1 percent, driven by the growth in manufacturing, while the services sector rose by 6.9 percent, supported by the continued recovery of tourism-related activities.
On the demand side, household spending grew by 4.6 percent in the first quarter this year, slower than the 6.4 percent in the same quarter in 2023 and the previous quarter’s 5.3 percent.
National Statistician Dennis Mapa said the first quarter household spending growth rate was the slowest since the 2.6 percent in the third quarter of 2010, excluding the pandemic years.
Balisacan said household spending slowed “due to elevated prices of major food items and the heatwave.”
Likewise, government spending posted a slower growth of 1.7 percent in the first quarter from 6.2 percent in the same quarter in 2023.
Gross capital formation grew by 1.3 percent in the first quarter, a deceleration compared to the 12.8-percent growth in the same period of 2023.
Balisacan attributed the slowdown to the effects of elevated interest rates in the past four to five quarters, which are still being felt today and may linger for a while.
Despite these developments, he said the turnaround in net export performance, which rebounded to 9.5 percent in the first quarter from contractions posted in the same period and in the fourth quarter last year, is fueling optimism.
“The primary driver of this increase in our merchandise exports was the recovery in exports of electronic products,” he said.
While the El Niño and the prolonged period of heat affected certain sectors including construction, he said mitigation efforts put in place by the government helped soften the impact.
“I think that unless we see a reversal in the gains that we are making and in tempering the inflation, particularly in food and energy, I don’t see any reason why the second quarter [growth] should be any weaker than in the first quarter,” he said.
With hard work and the right policies, he said the government is confident the six to seven percent growth target would be achieved this year.
He said ensuring food security remains a top goal and addressing the impact of climate change is seen as urgent.
With the high heat index disrupting schooling, work and the economy and even endangering the lives of the most vulnerable, he said the swift decision to revert to the old school calendar is a crucial step to protect the health of students and teachers.
“However, much more needs to be done. It is important to develop an action plan to ensure the health and safety of all, especially the vulnerable; install the necessary cooling features in workspaces, schools, homes and public spaces; adjust work schedules as necessary, but ensure business and service continuity,” he said.
Oikonomia Advisory & Research Inc. president and chief economist John Paolo Rivera said in an email that the first quarter performance is indicative of the impacts of slower private and public spending reinforced by steep policy rates, as well as inadequacies in capital formation and the undermined performance of the agricultural sector.
“This calls for reforms on macroeconomic policies as it encompass a lot of variables to be considered,” he said.
ING senior economist Nicholas Mapa said the El Niño weather disturbance is expected to impact economic performance in the second quarter on the income side, possibly weighing on agriculture output.
HSBC Global Research said high interest rates may lead to a moderation in growth in the Philippines in the second half, but not slow enough to be a cause of concern for the Bangko Sentral ng Pilipinas (BSP).
“Nonetheless, we expect growth to remain robust in 2024 at 5.8 percent. So the BSP has a lot of leg room to work with when it comes to timing its rate cut,” it said, adding BSP is expected to trim rates after the US Federal Reserve, which will be in the fourth quarter of this year.