The Philippine economy sustained its growth momentum with real gross domestic product (GDP) growth further accelerating to 7% in Q2 2016, from the 6.8% in the previous quarter, according to figures from the National Economic Development Authority.
The current quarter GDP growth is also significantly higher compared to the 5.9 percent growth registered in Q2 2015.
Growth was driven by stronger business confidence, low interest rates, and strong performance of the construction sector.
Ernesto M. Pernia, Socioeconomic Planning Secretary and NEDA Director-General says the 7% growth in the second quarter of 2016 is an upbeat start for the current administration.
Pernia noted that the growth is within market expectations given average consensus forecast of 6.1 to 7.2 percent for the second quarter.
“This strong growth increases the probability of our attaining the revised full-year 2016 DBCC-approved real growth projection of 6 to 7 percent,” says Pernia.
Pernia adds that with the first semester GDP growth of 6.9-percent, the economy will need to grow by at least 5.1 percent in the second half of the year to attain at least the low-end of the growth target.
“While it is normal to see a slowdown in the second semester during election years (possibly 1.5 to 2.0 ppt lower than the first half), the smooth transition of power and assurance of macroeconomic policy consistency and continuity by the new Administration will likely keep business and consumer confidence strong to meet the full year target,” says Pernia.
Likely the fastest in emerging Asia
Among the major Asian emerging economies, the Philippines likely remains the fastest or second fastest-growing economy in the second quarter of 2016, followed by China, which grew by 6.7 percent, Vietnam by 5.6 percent, Indonesia by 5.2 percent, Malaysia by 4.0 percent, and Thailand by 3.5 percent.
Data for India are not yet available but some forecasts put it above 7 percent.
Pernia admits that the previous administration built a strong and stable economy that can be built on further by maintaining the sound macroeconomic, fiscal, and monetary policies already in place. He noted that the growth has been investment-driven.
“Moving forward, despite the good numbers for the first six months of 2016, there is still a risk of seeing a lower growth rate in the second half of the year. This is a normal occurrence during election years.
“Consumer sentiment will also likely normalize given the post-election season. What is important is that government continues the smooth transition of power and commits to its agenda of maintaining a consistent macroeconomic policy so that business and consumer confidence will remain strong.”
Pernia notes that over the medium-term, the new administration is aiming still for a steady acceleration of growth towards 7 to 8 percent. This will be supported by sustained and deepened reforms. These include a comprehensive tax reform, sustained investment in infrastructure, easing of restrictions on foreign investments, reduction of cost of doing business, and strengthening of agro-industrial linkages.