THE government will have difficulties attaining its goal of halving poverty incidence by 2022 if economic performance will remain anemic for the next three years, local economists said on Thursday.
Local economists made the statement after the Philippine Statistics Authority (PSA) reported that GDP growth for the second quarter reached 5.5 percent, lower than government’s target and analysts’ expectations.
The figure is the lowest in 17 years, according to the National Economic and Development Authority (Neda). It is also slower than last year’s 6.2 percent and the 5.6 percent recorded in the first quarter of 2019.
“Weaker growth means less poverty reduction because poverty reduction is positively correlated with higher growth,” private economist Calixto V. Chikiamco told the BusinessMirror in an interview.
“[While there are] no precise statistics, [slower growth] means that the government’s target of halving poverty rate within the Duterte administration is not going to be met,” Chikiamco added.
Bank of the Philippine Islands (BPI) lead economist Emilio S. Neri Jr. said the weak GDP data caused by the dismal performance of agriculture and the construction sector likely slashed the incomes of Filipino laborers.
Based on PSA data, Agriculture, Hunting, Forestry and Fishery grew by only 0.6 percent in the second quarter while construction contracted 0.6 percent.
Construction is the only industry that registered a decline in performance during the period. This was due to the 27.2-percent contraction in public construction.
“We are growing below our potential largely due to a contractionary fiscal and monetary policy mix. Contraction in agriculture and construction activity most likely led to lower incomes for a good part of [the] labor force, and caused poverty rates to stall at best,” Neri said.
Ateneo Center for Economic Research and Development (Acerd) Director Alvin P. Ang said higher poverty rates are “inevitable” if the current growth trend will linger. He said this could affect not only the poor in the farm sector but also the “near-poor” Filipinos regardless of their source of livelihood.
Among all major economic sectors, PSA data indicated that Services recorded the fastest growth at 7.1 percent, while Industry expanded by 3.7 percent.
Neda Undersecretary for Policy and Planning Rosemarie G. Edillon said GDP expansion in the first and second quarters would have been higher by 1 percentage point if the budget impasse and “other hiccups” did not happen.
However, Edillon expressed confidence that a delay in the passage of the proposed 2020 General Appropriations Act is less likely as lawmakers have seen the impact of a delay on the economy.
Pernia said approving the budget on time is vital to implement more flagship projects. To date, only 11 of the 75 big-ticket public infrastructure projects are undergoing construction.
‘Better numbers’
Ang expects better growth data in the last two quarters. While the GDP expansion may not be that “dramatic,” it may help prevent more Filipinos from falling into poverty.
Like Ang, UnionBank Chief Economist Ruben Asuncion said he remains upbeat about the second half of the year.
“The slowdown in economic growth was undeniably related to the delayed passage of the 2019 national budget. Thus, if government spending can be fast-tracked and jobs can be generated as planned, then, poverty alleviation will not be derailed,” Asuncion said.
Socioeconomic Planning Secretary Ernesto M. Pernia and National Statistician Claire Dennis Mapa expressed confidence that the economy will grow faster the rest of the year and prevent more Filipinos from falling into poverty.
Pernia expects GDP to hit 6 percent to 6.5 percent by yearend. This means that economic growth will have to average 6.4 percent in the second semester to meet the low end of the government’s target.
Mapa said a 6-percent hike is “feasible” and will help the government attain its medium-term poverty targets.
“I think the poverty target is still on track. But of course we have to wait for the official 2018 [data] this October so we can set the direction, moving forward to 2022,” Mapa said on the sidelines of a news briefing on Thursday.
Pernia said efforts to achieve higher growth and keep poverty at bay are underway, particularly the full implementation of the Responsible Parenthood and Reproductive Health (RPRH) law.
“We will take all these things into account because we are still updating. I think the implementation of the family planning program is crucial in this undertaking,” he said.
Moving forward
Beyond the full implementation of the RPRH law, economists urged the government’s policy-makers to also practice introspection when implementing policies.
While it is true that the budget delay affected the government’s ability to finance its projects, challenges remain when it comes to absorptive capacity, according to Ang.
When the 2019 budget was finally approved and signed by the President in April, Ang said agencies may not have been able to absorb the surge in funds, as reflected in the latest public construction figures.
He said he remains hopeful that efforts to improve absorptive capacity are underway and would lead to better public construction data in the succeeding quarters.
Chikiamco noted that the government’s decision to rely on loans for its infrastructure push caused the lackluster performance of public construction. He said relying on Official Development Assistance (ODA) could lead to slower project implementation.
Aside from infrastructure spending, Chikiamco said government should consider implementing initiatives that will improve the country’s external trade performance, as more exports mean more jobs.
He also said Congress must pass the proposed Public Service Act and urged the Department of Finance to find a compromise on the Trabaho (Tax Reform for Attracting Better and High-Quality Opportunities) bill, particularly the 5-percent tax on gross income earned (GIE).
Image credits: AP/Aaron Favila