Consumer spending to boost GDP in H2

The expected increase in household and government consumption would help GDP grow by more than 7 percent in the second half of the year, according to the National Economic and Development Authority (Neda).

Socioeconomic Planning Secretary Ernesto M. Pernia recently told reporters that in the third and fourth quarters, GDP expansion could reach 7.2 percent.

This augurs well for meeting the government’s GDP growth target of 6.5 percent to 7.5 percent this year. The economy grew 6.4 percent in the first quarter while the government will release the official second-quarter GDP growth figures in mid-August.

“If there’s a kick in spending, it’s possible. [Particularly] in the third quarter,” Pernia told reporters in a recent interview. “[For the second quarter] I’m not so sure. I have to be cautious.”

Pernia is optimistic about the prospects of GDP growth because of the “structural transformation” of the economy in recent years.

In a presentation last Thursday, Pernia noted the shift in the growth drivers of Philippine economy. While consumption remains a major source of economic growth, the expansion of the manufacturing sector has been accelerating since 2010.

Pernia said the average growth of the industry sector rose to 2.8 percent in 2016, from an average of 2.4 percent between 2010 and 2015.

The sector grew by only 0.7 percent and 1.2 percent in 1990 to 1999 and 2000 to 2009 periods, respectively.

Apart from this, Pernia said total factor productivity in the Philippines has also been increasing and is now more comparable, if not higher, than other Asean countries.

“Total factor productivity  growth of the economy in recent years has been the fastest in Asean, at 2.3 percent. Which also means that capital efficiency [incremental capital output ratio] has been improving,” Pernia said.

The Duterte administration’s vow of ushering in the “golden age of infrastructure” in the Philippines is also expected to help GDP grow faster.

The government aims to spend around P8.1 trillion on infrastructure until 2022.

For the proposed 2018 budget, the proposed infrastructure outlay is P1.1 trillion, which is equivalent to 6.3 percent of GDP.

The infrastructure projects and programs will be outlined in the Public Investment Program (PIP) for 2017 to 2022. The PIP is the accompanying document of the country’s medium-term socioeconomic blueprint, the Philippine Development Plan (PDP).

“The PIP serves as a mechanism to improve resource mobilization by ensuring the linkage of the planning and budgeting processes toward the achievement of our goals,” Pernia said.

The goal of increasing public investments in infrastructure will not only boost GDP but also address the infrastructure gaps nationwide.

Earlier, Neda Infrastructure Staff Director Roderick M. Planta said in a presentation the infrastructure gap in paved provincial roads in terms of kilometers is 71.4 percent.

The infrastructure gap in barangays covered by municipal recycling facilities was also significant at 46.2 percent.

Neda data also showed that the infrastructure gap in paved city roads was at 38.2 percent and barangays covered by solid waste-management facilities is at 36.1 percent.

Double-digit infrastructure gaps were also observed in Mindanao’s household electrification level at 27.6 percent; access to broadband in cities and municipalities, 23.6 percent; and access to irrigation service, 13.6 percent.

Planta told the BusinessMirror, however, that the assessment does not include the gap in the number of health facilities, classrooms, housing and other similar infrastructure needs.

Aside from implementation delays and changes in project scope, he said, institutional issues, such as weak regulation and poor project planning, caused these gaps.

Other challenges include operational issues, such as unsynchronized planning, investment programming and budgeting.

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