The growth of the Philippine economy slowed to 4.3 percent in the second quarter of the year, from the 6.4 percent expansion in the first quarter, the Philippine Statistics Authority (PSA) reported on Thursday.
In a briefing, National Statistician Dennis Mapa said the gross domestic product (GDP) growth during the quarter was also lower than the 7.5 percent expansion recorded in the second quarter of 2022.
The country’s year-to-date economic growth settled at 5.3 percent.
In a joint statement read by National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan during the briefing, the economic team said the contributing factors to slower growth during the quarter include the effects of the interest rate hikes, inflation, and some slowdown in government spending.
The country’s economic team is composed of NEDA Secretary Balisacan, Department of Budget and Management (DBM) Secretary Amenah Pangandaman, and Finance Secretary Benjamin Diokno.
“For the second quarter, the moderate economic expansion was driven by increases in tourism-related spending and commercial investments, but was tempered by high commodity prices, the lagged effects of interest rate hikes, the contraction in government spending, and slower global economic growth,” the economic team said.
All major economic sectors, which include agriculture, forestry, fishing, industry, and services posted positive growths in the second quarter of 2023 with 0.2 percent, 2.1 percent, and 6 percent, respectively.
On the demand side, the growth of the household final consumption expenditure reached 5.5 percent.
Exports of goods and services grew by 4.1 percent while imports of goods and services slightly went up by 0.4 percent.
The government’s final consumption expenditure (GFCE) and gross capital formation, however, contracted by 7.1 percent and 0.04 percent, respectively.
“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 economic team said.
Growth target still achievable
Despite the slowdown in the second quarter, the economic team believes that the economic growth target for this year remains achievable.
“To achieve the target growth rate of 6 (percent) to 7 percent for the year, the country’s GDP needs to grow by at least 6.6 percent in the second half of 2023. Notwithstanding the challenges, we believe this is still attainable,” the economic team said.
To achieve this, the government will accelerate the execution of programs and projects, including the delivery of public services, under the 2023 national budget.
According to the economic team, the Economic Development Group (EDG) has been discussing how various government agencies could expedite the implementation of these programs and projects for the rest of the year.
Government agencies, including local and regional government entities, are instructed to formulate catch-up plans, accelerate, and even frontload the implementation of these programs and projects.
The economic team said fiscal stimulus activities are also underway to increase the productive capacities of both the public and private sectors.
To address the adverse impact of the recent typhoons and monsoon rains, the economic team recommended the immediate use of the Quick Response Fund and other disaster-related budgetary instruments of the government.
While inflation already decelerated, the economic team said the government would continue to intensify supply-side interventions and demand-side management measures to maintain price stability amid upside risks, including weather disturbances, El Niño, trade tensions, and the imposition of export bans in other countries.
“The improving outlook for inflation bodes well for the easing of interest rates and should pave the way for the expansion of activities of businesses, households, and the rest of the private sector. The government will also intensify its targeted measures to cushion the impact of high inflation on vulnerable sectors,” the economic team said.
The government will likewise closely monitor the impact of the global economic slowdown and will hold more discussions with sectors that will be affected.
Amid the challenging economic environment in 2023 and 2024, the economic team assured that the government is ready to make policy adjustments to ensure that the growth target will be achieved.
“We firmly believe that the prospects of the Philippine economy remain strong and positive. Our economy has weathered the worst and most challenging times during the pandemic. Now, we are better equipped and more resilient to withstand the various risks and challenges on both the external and domestic fronts,” the economic team said.