Philippine Economy: Firing on All Cylinders
The 7.4-percent expansion of the Philippine economy in the second quarter of the year came as no surprise to me. Robust corporate earnings in the April-to-June period, a booming travel sector and energetic consumers visiting and dining in the malls are telltale signs that the economy is powering through the headwinds.
The easing of mobility restrictions, of course, allowed more businesses to resume operations and rehire employees displaced at the outset of the pandemic. The 7.4-percent growth in the gross domestic product in Q2 is a strong follow-up to the revised 8.2-percent expansion in the first quarter.
The Philippines now has registered five straight quarters of growth—clear proof that the economy has overcome the pandemic. The growth may have slowed down from the first-quarter expansion but base effects simply explain the reduced pace. The economy expanded at a faster rate of 12.1 percent during the comparative period last year.
Also restraining the economic momentum in the second quarter was the surge in global commodity prices, led by petroleum products. The war between Russia and Ukraine and the lockdowns in China disrupted the global supply chain, leading to spiraling costs of commodity prices not only in Asia, but also in Europe and North America.
Another factor is the sluggish performance of the agriculture and fisheries sector, which remained vulnerable to climate change. Agriculture grew just 0.2 percent in the second quarter, compared with the 6.3-percent and 9.1-percent expansion of the industry and services sectors, respectively.
The government, however, is doing its best to improve the farm sector, with no less than President Ferdinand Marcos Jr. heading the Department of Agriculture to give it the attention and assistance it deserves.
Nevertheless, we have the second fastest-growing economy among members of the Association of Southeast Asian Nations. The Philippines was the second best-performing nation among the region’s major emerging economies, next to Vietnam, which grew 7.7 percent in the second quarter. More importantly, we achieved the growth rate while other bigger economies struggled. China, for example, announced a meager growth of 0.4 percent in the quarter.
The country’s growth averaged 7.8 percent in the first half, or above the government’s target range of 6.5 percent to 7.5 percent. This impressive feat means more Filipinos are finding jobs. The unemployment rate, per the report of the Philippine Statistics Authority, eased to 6 percent in June from 7.7 percent a year ago, with more than 1.5 million Filipinos joining the labor force this year.
The economy, though, is not living up to its full potential. We should pursue the full reopening of the economy, including the resumption of in-person classes, to enable our young learners, particularly those in Grades 1 to 3, to catch up with their lessons. The two-year closure of schools has adversely affected the literacy and reading comprehension of public school students in age group 7 to 9.
The vaccination program will play a crucial role in the resumption of onsite classes. We should consider putting up vaccination sites in schools to make sure Filipino learners are protected and educated well.
I am also hoping that inflation will settle within the government’s target range of 2 percent to 4 percent in the third and fourth quarters, so that more poor households will feel the benefit of the expanding economy. Our biggest challenge, though, remains the rising inflation rate, which is being caused by overseas developments.
President Marcos, fortunately, is addressing the problem of rising food prices head-on. To combat inflation and protect consumers, it is imperative that we ensure food security and reduce transport and logistics costs. Investing in agriculture and more infrastructure projects will bolster food production.
Price stability is the key to making economic growth more relevant and inclusive. Taming the inflation rate will prevent an erosion of the consumers’ purchasing power. I believe we will attain faster GDP growths in the coming years if we keep inflation within target and decide to fully reopen the economy.