The Philippines is currently the fastest growing economy in Asia with a 7 percent growth in terms of gross national product (GDP) in the second quarter, surpassing China’s GDP growth of 6.7 percent.
The National Economic and Development Authority (NEDA) is optimistic that the Philippines would sustain its economic growth this year, while some analysts forecast even a higher growth above 7 percent.
Other major Asian emerging economies such as Vietnam with 5.6 percent growth, Indonesia with 5.2 percent, Malaysia, 4 percent and Thailand, 3.5 percent.
Economic Planning Secretary Ernesto Pernia gave credit to the previous Aquino government for putting a strong and stable economy that the Philippines can build on further by maintaining the sound macroeconomic, fiscal, and monetary policies already in place with a investment-driven growth.
Pernia pointed to the biggest challenge of attaining an inclusive growth that would benefit more people.
“We must improve the competitiveness of our markets and business climate to take advantage of the new surge of investments in the region. We must look at the sectors and geographic areas that have been lagging behind and determine how to improve their access to these opportunities, says Pernia.
Investments contributed the highest share with 5.7 percentage points to GDP growth. Investments in durable equipment posted an increase of 42.8 percent, while private sector investments in construction grew to 8.3 percent, driven by stronger business confidence, low interest rates, and strong performance of the construction sector.
Strong public spending was driven by the boom in public construction and government consumption, which grew by 27.8 percent and 13.5 percent, respectively.
Pernia says private consumption grew stronger in comparison to the previous quarter and year due to the low inflation and interest rates, improved labor market conditions, and steady consumer confidence. Domestic demand growth accelerated to 12.3 percent from 12 percent in the first quarter of 2016.
Philippine exports of goods and services continued to slow down to 6.6 percent due to weak external demand, despite the 15.3 percent growth of services exports due to weak external demand.
Imports of goods rose to 22.9 percent largely due to increased purchases of capital goods and durables as more companies had increased their investments. Services imports remained strong at 13.3 percent, significantly higher than the 10.3 percent in the previous quarter.
On the downside, the performance of the agriculture sector remains dismal at -2.1 percent due to the lingering effects of El Nino and the risk La Nina that would likely intensify between August and October 2016.
Pernia says the Department of Agriculture is already crafting an action plan that identifies the most vulnerable towns and cities, focusing on appropriate intervention, preparedness, response, immediate recovery and rehabilitation.
“There is still a risk of seeing a lower growth rate in the second half of the year. Over the medium-term, the government is aiming still for a steady acceleration of growth towards 7 to 8 percent, supported by deepened reforms such as a comprehensive tax reform, sustained investment in infrastructure, easing of restrictions on foreign investments, reduction of cost of doing business, and strengthening of agro-industrial linkages.”