Research group IBON said that the Philippine economy is on
its way to a third straight year of slowing economic growth under the Duterte
administration. The group said that while the economy registered higher growth
in the third quarter of 2019, the factors behind this are too weak and unsustainable.
The government recently reported 6.2% gross domestic product
(GDP) growth in the third quarter of 2019. National Economic and Development
Authority (NEDA) secretary Ernesto Pernia said that this means the Philippine
economy is “surging” and was confident that the government could meet its 6% full-year
growth target for 2019.
IBON said however that annual economic growth has been
slowing since the start of the Duterte administration, falling from 6.9% in
2016, to 6.7% in 2017 and to 6.2% in 2018. The group said that GDP growth in the
fourth quarter of 2019 would need to be at least 7.4% just to match growth in
2018.
In the last four decades, the economy was only able to
achieve 7.4% growth in the fourth quarter just once (in 1989), said the group. IBON
also noted that the 6.2% third quarter growth spurt is higher than the 5.5% of
the previous quarter and 6% in third quarter 2018. However, it is much lower than
its peak 7.2% first quarter 2017 growth.
The third quarter growth was mainly due to increases in
household spending, construction and government spending. Household consumption
rose by 5.9%, construction by 17.3%, and government spending by 9.6 percent.
IBON said that while household spending was faster than the
5.3% in the third quarter of 2018, this was still lower than the 5.7% average
of the past decade. The group also said that higher household consumption was most
likely just driven by higher overseas Filipino worker (OFW) remittances this
year. But remittances have been slowing for years and the uptick is likely only
momentary.
Construction accelerated from the 13.3% growth in the third
quarter of last year. IBON said however that this short-term stimulus is only while
construction is ongoing. Another question is how big and sustained infrastructure
spending can be with government’s Build Build Build program faltering. The
group noted that infrastructure spending contracted to -4.3% in
January-September 2019 from 45.9% in the same period last year. Accumulating
debt could also be a problem if this reaches unpayable levels.
IBON noted that the most important sources of domestic
demand and growth are showing signs of weakening. Agriculture momentarily
recovered with an increase of 3.1%, but it remains in long-term decline.
The manufacturing sector’s 2.4% growth is the slowest in 32
quarters or since the 2% clip in the third quarter of 2011. Manufacturing has
been stalling since the start of the year, said the group. This is because it has
become overly foreign-dominated and export-dependent and is adversely affected
by the slowing global economy and the US-China trade war.
To reverse the economic slowdown, IBON said that the government
can boost growth in a way that is both beneficial to the people and more
sustainable. There are redistributive measures that can be done right away and
will be felt by the people.
These include immediate and meaningful wage hikes to spur
greater consumption especially among lower income communities. The wider
informal economy will be stimulated. Lowering consumption taxes will also
increase their spending power. Growth can be boosted by higher taxes on the wealthy
and large corporations if the revenues are spent on expanding social and
economic services for the poor.
But the most sustainable source of growth in the long-run is
developing domestic agriculture and building Filipino industry to create more
jobs and raise incomes in the country, said the group. ###
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