(UPDATED) - The country's economy continued to slow down, with gross domestic product (GDP) growth reaching a new low of 5.6 percent in the first quarter of 2019.
This is the slowest growth rate recorded in 16 quarters, since the 5.1-percent growth in the first quarter of 2015, Socioeconomic Planning Secretary Ernesto Pernia said in a press conference Thursday, May 9.
He blamed the delay in the approval of the 2019 budget for the slowdown, saying this has weakened domestic demand and "severely hampered" government projects.
"As we have forewarned repeatedly, the re-enacted budget would sharply slow the pace of our economic growth," said Pernia, who is also director general of the National Economic and Development Authority (Neda).
He noted that Government Final Consumption Expenditure weakened, growing only by 7.4 percent compared to 13.6 percent in 2018 while public construction contracted by 8.6 percent.
Pernia and other economic managers earlier projected that GDP would grow by up to 6.6 percent "if we were operating under the 2019 fiscal program."
The Neda chief stressed the need for government to quickly implement and disburse the fiscal program under the 2019 General Appropriations Act (GAA) even as he called for a review of the cash-based budgeting rules.
"To prevent any further delays, the Department of Budget and Management needs to issue the Budget Circular for the General Appropriations Act as soon as possible. While we support the implementation of the cash-based budget system, the supervening circumstances — such as the delayed budget and the election season — warrant an urgent review of the cash-based budgeting rules," he said.
"If the payment period and budget validity are not extended, government agencies may decide to forgo implementing new programs and projects that are expected to take longer than seven months to complete, inclusive of the procurement process," he added.
The government has set a 6.0 to 7.0 percent growth target band for this year. To reach this, Pernia said the economy would have to grow by an average of 6.1 percent over the next three quarters.
The Philippine Statistics Authority (PSA) said Thursday that Trade and Repair of Motor Vehicles, Motorcycles, Personal and Household Goods; Manufacturing; and Financial Intermediation were the main drivers of growth for the quarter.
Among the major economic sectors, Services had the fastest growth at 7.0 percent. Industry followed with a growth of 4.4 percent. Agriculture, Hunting, Forestry and Fishing grew by only 0.8 percent.
Pernia said the agriculture sector's slower growth is due to the dry spell caused by the El Niño phenomenon, which is projected to continue until August this year.
"With this, the Department of Agriculture should extend its production support programs to adapt to a protracted El Niño occurrence. There is also a need for a more robust El Niño Mitigation and Adaptation Plan to address water, food, and energy security, as well as health and public safety in a more sustained manner. The longer term solution is to build the resiliency of the sector, which will require changes in production and processing patterns and practices of the agriculture sector.
Over the short term, Pernia cited the need to finalize the Rice Industry Roadmap to allow its immediate roll-out and release of the budget for the various projects and programs to be financed by the Rice Competitiveness Enhancement Fund.
On the slowdown in private construction, Pernia said this was expected and part of the business cycle.
This may be addressed by the immediate implementation of reforms that reduce the cost of doing business, he said.
"Amendments to the Foreign Investment Act, the Public Service Act, and the Retail Trade Liberalization Act will also encourage investments in industry and services, and boost private construction as there will be greater need for factories and office spaces," he added.
Meanwhile, Pernia said household spending is expected to remain robust given the more upbeat consumer sentiment and the decelerating inflation.
The PSA said Net Primary Income (NPI) from the rest of the world grew by 1.9 percent in the first quarter of 2019, resulting in the 4.9 percent growth of Gross National Income (GNI).
With the country’s projected population reaching 107.4 million in the first quarter of 2019, per capita GDP grew by 3.9 percent.
Meanwhile, per capita GNI and per capita Household Final Consumption Expenditure (HFCE) posted corresponding growths of 3.3 percent and 4.6 percent. (MVI/SunStar Philippines)