The robust economic growth in the third quarter was truly surprising, with most analysts expecting the gross domestic product to expand by only 6.6 to 6.8 per cent during the period.
The actual 7.1 per cent GDP growth for July to September was the fastest in Asia thus far, eclipsing China’s third-quarter growth rate of 6.7 per cent and Vietnam’s 6.4 per cent. (India, which has also been posting record-high growth rates, has yet to report its third-quarter economic results.)
It was one big positive development that prompted President Duterte’s people to lay claim to it as the new administration’s achievement.
To hear the President’s officials speak, it was as if the economy were in the doldrums and rebounded only when the administration took over. (July to September was the first quarter of the Duterte administration.)
Actually, the Philippine economy had been growing above 6 per cent since the third quarter of 2015 on strong domestic demand, fuelled by the billions of dollars in remittances from overseas Filipino workers and the low inflation regime.
The annual inflation rate has stayed below the Bangko Sentral ng Pilipinas’ target range of 2 to 4 per cent since May last year, while interest rates have similarly remained steady, thus aiding consumer spending.
The Philippine economy grew by nearly 7 per cent in the first quarter of 2016, making it the second fastest-growing among Asian countries, after India’s 7.9 per cent.
The Philippine Statistics Authority (PSA) said the GDP, or the value of goods and services produced by a country, expanded by 6.9 percent from January to March, faster than China’s 6.7 per cent and Vietnam’s 5.7 per cent. It was then the Philippines’ highest quarterly GDP gain since the second quarter of 2013.
The Philippines was again Asia’s second fastest-growing economy in the second quarter with its 7 per cent expansion for the April to June period, faster than China’s 6.7 per cent but lower than India’s 7.1 per cent.
Helping boost growth in the second quarter was spending ahead of the May 9 presidential election.
The PSA noted that investments, which jumped by 27.6 per cent in the second quarter, made the biggest contribution to second-quarter growth, followed by household consumption, which rose by 7.3 per cent.
During the third quarter, GDP growth was bolstered by strong construction and infrastructure investment and up beat consumer spending (car and home purchases, for example) fuelled by low inflation and interest rates.
Agriculture also managed to reverse its decline, thus aiding in the overall economic growth performance for the quarter. But it was mostly private-sector.
While government spending on infrastructure—mainly through the Department of Public Works and Highways, which expedited work on many of the long-delayed road and drainage projects—ramped up in the third quarter, the Duterte administration continued to underspend by about P60 billion (S$ 1.7 billion) during the quarter.
The outlook for the Philippine economy remains bright.
Astro del Castillo, an analyst at securities firm First Grade Holdings, admitted that the third-quarter growth figure was a surprise for the financial markets, but affirmed the private sector’s long-standing view that economic fundamentals remained intact despite the political noise since Mr Duterte’s rise to power.
Thus, even with the global headwinds mainly from the risk associated with a Trump presidency in the United States and dismal economic performances in Europe, the Philippines will continue to post robust growth in the coming years.
In fact, many private economists have upgraded their forecasts for Philippine growth through 2017 following the surprising 7.1 per cent economic expansion in the third quarter.
As Economic Planning Under-Secretary Rosemarie Edillon aptly put it, “our economy’s strong growth in the third quarter is a very good sign of things to come.”
The Philippine Daily Inquirer is a member of The Straits Times media partner Asia News Network, an alliance of 21 media.