The second-quarter economic growth

THE Philippines’s gross domestic product grew by 5.6 percent in the second quarter from the same period in 2014. This was better than the revised 5-percent growth in the first quarter of 2015.

While this was below the consensus expectations of about 5.7 percent to 5.8 percent, with the potential headwinds facing the economy in the second quarter, it was a good result.

Agricultural production in the second quarter actually contracted from last year’s by 0.5 percent. While this does not seem noticeable in the major urban areas, it had a substantial effect in many regions where a few pesos less for the farmworkers limit consumer spending.

There were two other negatives that could have severely limited economic growth. The year-on-year increase in retail spending growth was lower than in 2014. Industrial production has contracted at 7.3 percent for two consecutive quarters and may be showing signs of bottoming out. Further, net hiring in Metro Manila was flat in the second quarter.

While the specific internals of the economic growth has not yet been released, comments from Economic Planning Secretary and Director General of the National Economic and Development Authority Arsenio M. Balisacan reveal the general economic drivers.

Of course, comments must always begin with kudos to the government and the administration, and this time was not an exception. Secretary Balisacan said: “Government spending accelerated in the second quarter, where [the] government’s final consumption expenditure rose by 3.9 percent from 1.7 percent in the last quarter [first quarter 2015]. Public construction bounced from a 24.0-percent contraction in the first quarter to a 20-percent growth.”

There is no particular reason to dispute this assessment, but the data given to the public may be “allocated spending” rather than actual “cash-in-the-economy” disbursements. We will reserve judgment as we wait for that data.

However, once again, it is the Philippine private sector that is doing all the heavy economic lifting.

Capital formation—buying equipment, buildings and other intermediate goods—grew by 17.4 percent in the quarter, compared to an 8.6-percent growth in the previous year. Private construction also maintained a double-digit growth rate.

The key to these numbers is that the private sector just keeps on doing its job regardless of the externals and the deficiencies of the government. For example, the Manila port congestion may have “ended” in the first quarter, but something like that would have longer-reaching effects. But Filipino businesses have learned how to successfully cope and handle almost anything that is thrown at them. Political foolishness, natural disasters, and global shocks are all in a day’s work for the Filipino businessman and businesswoman. Certainly, overseas remittances and outsourcing are critical to the economy and continue to perform well. However, credit must be given to the private sector as it does what it can to maximize the nation’s external cash flow.

Perhaps the mascot for Filipino business should be a battle-scarred carabao that just keeps moving forward regardless of the obstacles it has to hurdle.

Image credits: jimbo Albano

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