Economy grows at faster 6.3% pace in Q2

Still among best performers in East Asia

MANILA, Philippines —  The Philippine economy posted a faster growth rate in the second quarter, despite anemic consumption spending amid increased investments and government spending.

In a press briefing yesterday, Philippine Statistics Authority Undersecretary Dennis Mapa said the country’s gross domestic product (GDP) grew by 6.3 percent in the second quarter of this year.

This is faster than the 4.3 percent expansion in the second quarter last year and the revised 5.8 percent growth in the first quarter of 2024.

Mapa said the second quarter GDP growth is also the fastest since the 6.4 percent expansion in the first quarter of 2023.

National Economic and Development Authority Secretary Arsenio Balisacan said the growth in the second quarter brings the GDP growth in the first half to six percent, putting the country on track to achieve its six to seven percent growth target for this year.

“This performance keeps our position as one of Asia’s best-performing major emerging economies,” he said, noting that among East Asia’s economies that have released their second quarter 2024 GDP growth, the Philippines is just behind Vietnam’s 6.9 percent, but ahead of Malaysia’s 5.8 percent, Indonesia’s five percent and China’s 4.7 percent.

Household spending, the top contributor to the GDP growth on the demand side, grew by 4.6 percent in the second quarter this year, slower than the 5.5 percent in the same period last year.

“The household final consumption expenditure continued to be a bit anemic, the growth is not as strong as one would expect,” Balisacan said, noting that this means the impact of the high inflation and high interest rates that were implemented months or quarters earlier is still being felt.

Inflation quickened to 4.4 percent in July, the fastest since October last year, and exceeded the government’s two to four percent target for the year, driven by faster increases in utility and food costs.

Average inflation in the January to July period was at 3.7 percent.

At its meeting last June, the Bangko Sentral ng Pilipinas (BSP) kept the benchmark interest rate at 6.5 percent, a 17-year high.

Balisacan attributed the acceleration in GDP growth to the increase in total investments by 11.5 percent in the second quarter from a growth of 0.7 percent in the same period last year, fueled by robust construction activities.

Also driving the faster GDP growth was government spending as it expanded by 10.7 percent in the second quarter this year, a reversal of the 7.1 percent contraction in the same period last year.

Among major economic sectors, industry and services posted year-on-year growth in the second quarter of 7.7 percent and 6.8 percent, respectively, while agriculture, forestry and fisheries registered a year-on-year decline of 2.3 percent.

Balisacan said the growth performance could have been even more impactful on all Filipinos if not for the high inflation and interest rates that the country experienced in the last two years.

“Considering the lagged effect of interest rate hikes that the BSP carried out in response to the high inflation in 2022 and early 2023, we estimate that economic growth could have been over half a percentage point higher in 2023 if such rate hikes did not materialize,” he said.

Despite the faster inflation in July, Balisacan said the government expects inflation to ease.

He said among the government’s most urgent priorities is to continue to push for food security by managing food inflation.

“Keeping food inflation and interest rates manageable is expected to spur both consumption and investment activity among households and businesses, strengthening our economic growth prospects in the coming months and the medium term,” he said.

He also said the government is implementing reforms to make the country more attractive to investors.

The government is also investing in human capital for the country to harness and fully reap the benefits of the demographic dividend.

“Our goal is to drive substantial investments in both physical and human capital to generate more and better jobs offering higher wages, enhance the competitiveness of our economy, and, most importantly, reduce poverty to single-digit levels by 2028 – a commitment that we intend to meet,” Balisacan said.

For his part, Rep. Joey Salceda, who chairs the ways and means committee of the House of Representatives said the country’s prospects remain strong and positive despite global challenges.

“I am optimistic we will meet growth targets this year: although I strongly urge the government to continue to expedite spending and approvals for PPP (Public-Private Partnership) projects,” he said.

For Salceda, the latest economic performance shows the notable sources of growth such as construction and investments.

“The shorthand for that is simple: investment. The private sector sees the continued growth potential of the Philippines and is locking in. Part of that, I attribute to the enactment of the PPP Code, which has stimulated investment in infrastructure especially at the local sector,” he said.

He said the decline in agriculture, however, is a source of concern, despite price increases in corn and poultry – which should have increased gross value-added.

“In other words, volumes of output seem to have suffered as a result of both El Niño and heavy rains,” he said.

Speaker Ferdinand Martin Romualdez was more than glad of the economic turnout so far.

“The 6.3 percent economic growth rate shows the effectiveness of President Marcos’ economic strategies and the solid legislative support of Congress. Our economy is steadily recovering and growing, creating more job opportunities and improved quality of life for Filipinos,” he said.