MANILA — The Philippine economy expanded by 6.8 percent in the first quarter of 2018, making it still one of the fastest-growing economies in the region even as rising inflation reduced consumption and productivity in some sectors.
The Philippine economic growth during the period followed Vietnam’s 7.4 percent growth, same as China, and higher than Indonesia’s 5.1 percent.
Socioeconomic Planning Secretary Ernesto Pernia said the country’s gross domestic product (GDP) could have posted a first quarter growth closer to 7.5 percent, the mid-range of full-year growth target of 7 to 8 percent for 2018, if not for higher prices.
“If not for the first quarter 2017 to the first quarter 2018 rate of increase in inflation, real GDP growth would have been well within our growth rate targets of 7 to 8 percent,” he said in a press briefing Thursday. “So, inflation is the spoiler, that is why we really need to focus on inflation.”
Pernia, also National Economic and Development Authority (NEDA) Director-General, attributed the rising inflation to the temporary effects of the implementation of Tax Reform for Acceleration and Inclusion (TRAIN).
TRAIN, the first package of the government’s tax reform program, reduced personal incomes taxes but increased excise taxes on fuel and motor vehicles since the law took effect last January 1.
“For consumers, we need to address sources of rising inflation, even if the uptick brought by the temporary effects of TRAIN is expected to gradually ease this year,” he said.
The NEDA chief underscored the need to immediately lift the quantitative restrictions on rice in a bid to reduce retail price of rice, thus increase the purchasing power of low-income households and bring down inflation.
“We also need to address rising prices of fresh fish, meat, and vegetables. As demand continues to increase with a growing population and expanding economy, reducing food inflation is necessary to increase people’s purchasing power,” he said.
Pernia said the country should also hasten mitigating measures, such as the Unconditional Cash Transfer to the poorest 50 percent of households, and the Pantawid-Pasada subsidy for jeepney drivers.
“But even as we face challenges, we remain hopeful that at least the lower-end of the full year GDP growth target range of 7-8 percent is doable. Domestic demand is expected to increase in view of the recently approved tax reform package, which is deemed to boost income and consumption of taxpayers,” he added.
The Philippine Statistics Authority (PSA) reported that industry recorded the fastest growth at 7.9 percent in the first quarter, followed by services at 7 percent.
Agriculture also grew at a slower pace of 1.5 percent after bouncing back from drought brought about by El Nino last year.
“On the supply side of the economy, the 7.9-percent growth in industry was backed by the manufacturing and construction sub-sectors’ continuing to grow at higher rates of expansion. Again, this indicates that our Build! Build! Build! (infrastructure) program is gaining ground,” added Pernia.
On the demand side, Pernia noted growth in public construction, government consumption, and capital formation, indicating that “our reform efforts are bearing fruit and infrastructure development is accelerating, as planned.”
He said external demand weakened significantly, with growth in exports of goods easing to 2.9 percent, after consistent growth averaging 21.1 percent in 2017.
“Net exports therefore worsened during the quarter. This is something we need to keep an eye on,” he added. ( Leslie Gatpolintan/PNA)
