Xinhua reported that the disappointing third quarter growth has dashed hopes that the Philippines will achieve the targeted 4.5% to 5.5% GDP growth for the whole year much less than the government's aspirational growth target of 7% to 8%.
The Philippine economy slowed to 3.2% in the third quarter, the lowest in the region, pressured by a sharp decline in the construction sector and slackening exports. The country's construction sector slowed owing to the delayed implementation of the government's Public Private Partnership program.
Mr Fernando Aldaba of Ateneo de Manila University estimates that unless the economy expands by 7.2% in the fourth quarter, it is highly unlikely that the government's GDP target will be achieved. He said that the 7.2% growth rate in the fourth quarter is probably not achievable, I believe 3.6% to 4% growth will be a more realistic figure for the year."
The National Statistical Coordination Board, which issued the actual growth figures, attributed this to the death spiral of debt that hounds our trading partners, the uninvigorating, albeit already expanded government spending, and the decline in fishing due to unfavorable weather and the high cost of fuel.
Given the less than stellar economic performance in the first half of the year, the NSCB estimated the growth for the first nine months of 2011 at 3.6%. This, according to NSCB Secretary General Mr Romulo Virola, is quite a distance even from the lower end of the whole year target of 4.5%.
Mr Benjamin Diokno, economics professor at the University of the Philippines, said with the domestic economy decelerating for the third consecutive quarter from the 7.3% GDP growth last year, the economy now appears to be heading to another downgrade, plausibly a growth of 3.3% to 3.9%."
Despite the lower than expected figures, the government's economic managers remain optimistic that the growth target is still achievable.
Mr Cayetano Paderanga socioeconomic planning secretary said that "Notwithstanding the third quarter's moderate growth, there are indications of more favorable prospects for the fourth quarter of 2011. There is general expectation of robust consumption, continuing improved investments, and higher government consumption in the near term."
Mr Paderanga said that consumption, the key driver of the country's economy, will be stronger in the fourth quarter owing to the Christmas celebrations and the onset of the harvest season. He added that a more stable macro economy, steady consumer and business sentiment, the continued inflows of remittances from Filipinos overseas and accelerated government spending will boost growth in the fourth quarter.
Economists blamed the slow implementation of PPP, the government's key infrastructure program and government's underspending in general for the lower than expected growth for the third quarter.
Mr Diokno said that "Because of government underspending in public construction, the sector shrunk by 12.2%. Not surprisingly, public construction plunged by 21.3%. What is equally worrisome is that even private construction has started to contract by 7.8%."
Mr Aldaba said that the slow progress of PPP's implementation means the signal being sent by government is not positive as PPP is a flagship program. He added that "The PPP's implementation is a significant indicator of government's resolve to increase infrastructure investment."
But Paderanga vowed that things will change in the fourth quarter, thanks to the government's speedy release of stimulus funds.
He said that "Public construction and government consumption and services are likely to pick up in the coming quarters due to quick releases and faster utilization of the PHP 72 billion Disbursement Acceleration Program."
Mr Paderanga said that the stimulus fund will finance public work and agriculture infrastructure projects, housing, additional funding support for local government units, rehabilitation of rail systems, projects that support peace efforts, healthcare insurance for indigents, and human resource development training.
(Sourced from Xinhua)
