6.4% Economic Growth in Q4 is Impressive
The 6.4-percent expansion of the gross domestic product (GDP) in the fourth quarter of 2019 is clear proof that the economy is on the right track and that our fundamentals remain strong, despite several external headwinds.
It also makes the Philippines the second-fastest growing economy in Asia, next only to Vietnam which expanded 7 percent in the fourth quarter and ahead of China which grew 6 percent.
Other economies performed poorly last year because of global challenges, such as the tension in the Middle East, the US-China trade dispute, the Hong Kong riots and the subdued global trade growth. The World Bank estimated global growth settled at a postcrisis low of 2.4 percent in 2019 amid weakening trade and investment.
We can take solace in the fact that despite these global concerns, our economy grew at a robust pace. If not for the blip in the first half of 2019 because of the delayed passage of the national budget, I am pretty sure we could have met the government’s 2019 growth target range of 6 percent to 6.5 percent.
The full-year growth of the Philippines settled at 5.9 percent, a tad below the target. It was the first time in eight years that we grew below 6 percent, which was understandable because of the negative factors I mentioned before.
What is encouraging is that our economy is now in the position to expand faster in the next three years. Congress made sure of that with the timely passage of the 2020 budget, which would get major infrastructure projects going.
I will be satisfied to see the economy grow in the vicinity of 6 percent annually over the next three years to help generate more jobs and lift more people out of poverty. Remember that we achieved significant gains in job generation and poverty alleviation in the past three years.
The Philippine Statistics Authority reported earlier that the full-year 2018 poverty incidence, or the proportion of poor Filipinos whose per-capita income was not sufficient to meet their basic food and non-food needs, declined to a record-low 16.6 percent from 23.3 percent in 2015.
The unemployment rate also eased from 5.1 percent in October 2018 to 4.5 percent in October 2019, the lowest figure for all October survey rounds in the last 10 years.
What these data mean is that the economic growth is now being felt by a greater number of the poor, as they benefit from the economic activities happening in several sectors, such as the construction industry which is now actually in need of more workers.
The inflation rate also moderated to 2.5 percent in 2019 or within the target range of 2 percent to 4 percent set by the Bangko Sentral ng Pilipinas (BSP), from 5.2 percent in 2018 when the Philippines experienced a rice supply problem.
The National Economic and Development Authority (Neda) attributed the GDP growth on the demand side in the fourth quarter of 2019 to higher government spending. In fact, public construction jumped 34 percent year-on-year in the fourth quarter, with the completion of projects by the Department of Public Works and Highways, payment for the acquisition of right-of-way, and construction of government buildings.
On the supply side, the Services sector grew 7.9 percent in the October-to-December quarter. The Industry sector expanded 5.4 percent, while the Agriculture, Hunting, Forestry, and Fishing sector posted a growth of 1.5 percent, which reflected the impact of the El Niño dry spell in the first half and the African swine fever outbreak in the second half.
There are reasons to be optimistic this year, despite the damage caused by Taal Volcano’s unrest in the Calabarzon region on the domestic front and the persisting downward risks on the global outlook.
Several infrastructure projects are expected to be completed in Metro Manila, which will help ease the traffic. The timely implementation of the 2020 General Appropriations Act is moving projects at a swift pace.
Neda said the Philippines can also absorb manufacturing operations of multinational corporations, or MNCs, that is relocating from China amid the latter’s trade dispute with the US. This means we can receive more foreign direct investments that generate jobs.
I also believe the BSP will continue to support economic growth this year by reducing the cost of borrowing. This will encourage more businesses to invest, and more households to spend this year.
All of these positive economic developments are possible because of the political stability under the leadership of President Duterte, and our strong and steady fundamentals.