Capital formation was a silver lining in the latest economic growth data.

A BLISTERING 7.7% gross domestic product (GDP) expansion this semester — needed for the economy to hit the bottom of an official full-year target for 2018 — may still be “possible” on the back of strong capital formation, according to a senior official of the Department of Finance (DoF).
“While the [second-quarter’s six percent] growth rate was disappointing to us because it’s slower than what we thought we will achieve, there is that silver lining in the growth performance. The fastest growing sector is capital formation. It’s more than 20% and, because of that, we believe that in the future quarters we will be able to perform better,” Undersecretary Gil S. Beltran, the DoF’s chief economist, told reporters on Monday.
“Once the factories… the machines that were purchased in the second quarter will be operational, we expect that the growth will accelerate in the future quarters.”
Philippine Statistics Authority data show that gross capital formation grew 20.7% in the second quarter.
The 6.6% and six percent first- and second-quarter GDP growth rates, respectively, fueled a 6.3% first-half expansion that compares to the government’s 7-8% target for 2018.
“Still possible but difficult. If we get 30-40% increase in capital formation in the third or fourth quarter,” he said when asked if 7.7% overall economic expansion is doable.
Mr. Beltran said that an above-seven percent growth rate “is not new,” noting that it was reached during the presidency of Gloria M. Macapagal-Arroyo, how speaker at the House of Representatives.
“We have to push capital formation further because during those years that we achieved 7.7-7.8% growth, we had a 30-40% increase in capital formation. So we will need to work harder,” he said, adding this should offset agriculture’s marginal growth.
Asked whether overall price spikes could pull down economic growth, Mr. Beltran said inflation’s recent surge made a marginal dent on household consumption in the second quarter.
“What was affected is just consumer spending. It’s a slowdown of 0.1 percentage points. First quarter household consumption: it was 5.7% in the first quarter and went down to 5.6% in the second quarter,” he recalled. “Actually we have grown at very high rates in the past even with a higher rate of inflation.”
Inflation clocked in at a fresh multi-year-high 5.7% in July, bringing the year-to-date pace to 4.5% against the central bank’s 2-4% full-year target range for 2018. — Elijah Joseph C. Tubayan