By Marissa Mae M. Ramos
FIRST-QUARTER economic expansion was maintained at 5.6% even as the growth of services as well as of agriculture and allied sectors in that period was less than initially reported, the Philippine Statistics Authority (PSA) said a day before it reports preliminary estimates for second-quarter gross domestic product performance.
The 5.6% GDP growth in the first quarter marked its worst performance in four years. Analysts blamed the disappointing result to the 2019 budget’s nearly four-month delay which had left new projects unfunded.
A key measure of economic performance, GDP is the value of final goods and services produced in the country.
Growth of services was revised downward to 6.8% from the seven percent that was reported on May 9.
Likewise, growth in agriculture, hunting, forestry and fishing was downgraded to 0.7% from 0.8%.
Except for financial intermediation, whose growth was upgraded to 10.2% in the first quarter from the initial 9.8%, growth in the service subsectors were either retained or revised downwards.
Growth of agriculture and forestry, and fishing subsectors were revised to 0.6% and 1.4%, respectively, from 0.7% and 1.5%.
On the other hand, growth in industry was revised upwards to 4.8% from the previous 4.4%. The report saw upward revisions in manufacturing (4.9% from 4.6%) and construction (5.4% from 3.9%) while that of mining and quarrying was lowered to 4.7% from 5.3%.
For UnionBank of the Philippines, Inc. chief economist Ruben Carlo O. Asuncion, the “potential reason” for the downgrade in services sector growth may be “the impact of slow government spending.”
“In an election year, services should actually be firing on all cylinders and posting robust growth. But, it seems that the delayed budget really made a huge impact on [first quarter] economic growth,” he said in an e-mail.
The spending program for 2019 was signed into law by President Rodrigo R. Duterte on April 15, four months late.
In a separate e-mail, ING Bank NV Manila senior economist Nicholas Antonio T. Mapa noted the downward revision of the service subsectors “mirrored… the downgrading of household consumption expenditure data…”
“Agriculture was revised lower due to the adjustment for the fishing sector, perhaps due to the ill effects of the El Niño dry spell on the sector as water temperatures of ponds can turn inimical to the livestock. Meanwhile, the industrial sector saw a bump up mainly due to the revision on private construction activity with data trickling in after the initial report,” Mr. Mapa said.
On the expenditure side, downward revisions were made in the growth in household spending (6.1% from 6.3%) and exports of goods and services (5.7% from 5.8%). Meanwhile, higher estimates were noted in capital formation (8% from 6.8%) and imports of goods and services (8.6% from 8.3%).
Government spending was kept steady at 7.4% growth.
Moreover, the PSA revised upwards the gross national income (GNI) in the first quarter to 5.2% from 4.9% previously. GNI is the sum of the nation’s GDP and net income received from overseas.
“The odds are stacked against the economy to churn out growth above six percent, all the more with agriculture showing a contraction. Thus, the industrial sector via private construction and the services sector will be counted on hard to deliver the goods,” said ING’s Mr. Mapa.
The first-quarter 2019 revision comes ahead of today’s release of the preliminary estimates for this year’s second-quarter GDP.
A BusinessWorld poll of 15 economists yielded a median GDP growth estimate of 5.9% for the second quarter.
The government, through the interagency Development Budget Committee, set a 6-7% target band growth for this year, lower than the initial estimate of 7-8%.