News Analysis: Philippine economy slows down to 5.2 percent in Q1

The Philippine economy, one of the fastest growing in the region, grew by only 5.2 percent in the first quarter of this year, the country's lowest in three years.

The Philippines' gross domestic product (GDP) growth for the first quarter is lower than the 5.6 growth recorded for the same period last year, and down from the 6.6 percent in the fourth quarter of 2014. It is the lowest since the 3.8 percent growth recorded in 2011.

In a press briefing on Thursday, Economic Planning Secretary Arsenio Balisacan admitted that the first quarter growth figure is "lower than what the government and the market expected for the period."

"While growth in the private sector remains robust, the slower- than-programmed pace of public spending, particularly the decline in public construction, has slowed down the overall growth of the economy," Balisacan said.

Balisacan, who is the director general of the National Economic and Development Authority (NEDA), the country's top economic policy-making body, said that the drop in public construction spending was due to delays in some projects of government agencies.

Data from the Department of Finance showed that government spending of 504 billion pesos (11.28 billion U.S. dollars) during the last quarter was 13 percent below the target, even if it grew by 4.8 percent from the same period last year.

Balisacan cited the latest Department of Budget and Management report on the government's disbursement performance for the first quarter, which shows a "trend" towards faster government spending.

"If this disbursement trajectory is sustained and reflected in all government agencies, the higher government spending will fuel even more activities in the private sector, and thus push economic growth in the next quarters of the year," Balisacan said.

The NEDA chief said that private construction registered a double-digit rise of 14.2 percent in the first quarter, while private investments in durable equipment rose by 14.3 percent.

He added that the latest business confidence index from the Bangko Sentral ng Pilipinas (BSP), the country's central bank, " shows that next quarter confidence index climbed to 58.2 percent from 43.1 percent in the previous survey."

Balisacan said that consumer sentiment improved in the first quarter due to expectations of stable price of commodities, decline in oil prices, availability of more jobs, higher number of employed family members, and fewer calamities during the period.

"These clearly indicate that business and consumer confidence on the economy is still very high and is supportive of our optimism in hitting our growth targets for 2015," Balisacan said.

Despite the letdown in the first quarter, Balisacan said the government is keeping its full-year target of 7 percent to 8 percent as it expects faster government spending in the remaining quarters.

He said, however, that the economy should hit an average growth of 7.5 percent in the next three quarters in order to meet its full-year target of 7-8 percent.

Some analysts said that this is an uphill battle considering the slow growth in the first quarter. In fact, some multilateral financial institutions such as the International Monetary Fund and the Asian Development Bank have already lowered their growth forecasts for the Philippines this year.

But Balisacan is hopeful that the "effective facilitation" of government programs on poverty reduction and job generation will help it meet its growth targets until the end of the Aquino administration.

"Even if we end up with a 7 percent GDP growth for the whole year, we will still be one of the fastest growing economies in Asia," Balisacan said.

Finance Secretary Cesar Purisima said that while numbers fluctuate each quarter, there is an "unmistakable" positive trajectory.

"We are less concerned about the quarterly numbers game than getting the foundations of our growth right," he said.

While the GDP slackened, there has been a positive development in another major economic indicator: the country's inflation rate.

According to the BSP, the year-on-year inflation in the first quarter of this year remained within the government's target range of 3.0 percent at 2.4 percent, lower than the 3.6 percent posted a year ago.

The BSP said that the continued deceleration in inflation was driven mainly by the slower increases in food prices resulting from adequate domestic supply.

"Non-food inflation likewise slowed down due to the decline in power rates and the price of domestic petroleum products. Similarly, measures of core inflation decreased further during the quarter, indicating limited underlying price pressures," the BSP said. Endi