8-8-2024 (MANILA) The Philippine economy demonstrated remarkable resilience in the face of inflationary pressures, posting a robust 6.3% growth in the second quarter of 2024. This expansion, revealed by official data on Thursday, marks the fastest pace since the first quarter of 2023, surpassing economists’ expectations and painting a picture of an economy on the rebound.
The growth figure, which outstripped the 6.2% forecast in a Reuters poll and the revised 5.8% growth of the previous quarter, was primarily driven by increased government spending and a surge in investments. These factors helped to offset what Economic Planning Secretary Arsenio Balisacan described as “anaemic” consumption growth, as households continued to grapple with inflationary pressures.
A closer look at the data reveals a nuanced economic landscape. Consumer spending, typically a cornerstone of the Philippine economy accounting for two-thirds of output, grew by 4.6%. While positive, this figure underscores the ongoing challenges faced by households in the current economic climate. In contrast, investments saw a substantial increase of 11.5%, while government expenditure expanded by 10.5%, indicating a concerted effort by authorities to stimulate economic activity.
Balisacan, addressing reporters, noted the underwhelming performance of household consumption. “The household final consumption expenditure continued to be a bit anaemic, the growth is not as strong as one would expect,” he remarked, highlighting the impact of inflation on consumer behaviour.
Despite these challenges, the overall economic picture remains encouraging. The first half of 2024 saw an average GDP growth of 6.0%, aligning with the government’s full-year growth target range of 6.0% to 7.0%. This trajectory suggests that the Philippines is on course to meet its annual economic objectives, barring any unforeseen shocks.
However, the quarterly growth rate on a seasonally adjusted basis showed signs of moderation. At 0.5%, it was slower than the previous quarter’s 1.3% and fell short of the 0.9% forecast by economists, indicating potential headwinds in the domestic economy.
The GDP data release follows a concerning inflation report earlier in the week, which showed consumer prices rising at their fastest pace in nine months during July. The 4.4% inflation rate, exceeding market expectations and breaching the central bank’s target range of 2.0% to 4.0%, has prompted speculation about potential monetary policy adjustments. Central Bank Governor Benjamin Diokno suggested that a rate cut at the upcoming August 15 meeting was now “a little bit less likely” in light of these figures.
On a positive note, the economy received a boost from improved employment figures. The unemployment rate in June stood at 3.1%, the lowest since December 2023, reflecting a strengthening job market despite economic challenges.
However, not all sectors shared in the economic uplift. The agriculture, forestry, and fishing sector contracted by 2.3% year-on-year, primarily due to the prolonged dry spell caused by the El Niño weather pattern. This decline underscores the vulnerability of key sectors to environmental factors and the need for adaptive strategies in the face of climate change.
