Economic growth, weaker compared to the past two decades – Acting NEDA Sec Chua

Despite the challenges faced by the country’s economy, it is still well positioned to recover because of the solid macroeconomic and fiscal management which helped the Philippine economy to prepare for any crisis.

On May 7, National Economic and Development Authority (NEDA) Acting Secretary Karl Kendrick Chua reported in his speech that the Philippine economy has contracted by 0.2 percent in the first quarter of 2020, compared to the 5.7 percent growth during the same period last year. According to him, this is the first time real GDP growth fell into negative territory since 1998 during the combined El Niño and Asian Financial Crisis.

On the demand side, household consumption significantly slowed down by 0.2 percent as almost all items posted weaker growth. An exception was household spending on health, which grew by 11.5 percent, faster than the 6.9 percent in Q4 2019.

 

Meanwhile, the government spending grew by 7.1 percent. Though it is slower than the 17 percent in Q4 2019, it was noted that it is still higher than the 6.4 percent growth in government expenditure in the same period in 2019.

On the supply side, all major sectors of the economy showed weaker growth as only those that provide essential goods and services were allowed to operate during the Enhanced Community Quarantine (ECQ). Growth in the Services sector significantly moderated to 1.4 percent. Industry sector growth also declined by 3.0 percent, with the drop in manufacturing and construction and the sustained decline in mining and quarrying. The agriculture, fishery and forestry sector contracted by 0.4 percent primarily on account of lower production of palay and fishing and aquaculture.

Despite the challenges faced by the country’s economy, it is still well positioned to recover because of the solid macroeconomic and fiscal management of the country just like the recent laws of crucial economic and tax reforms such as the Tax Reform for Acceleration and Inclusion or TRAIN Law, the Sin Tax Laws of 2019 and 2020, the Rice Tariffication Law, the Universal Health Care Law, and the Ease of Doing Business Law have all helped the Philippine economy to prepare for any crisis.

“We continue to enjoy low and stable inflation, particularly after the passage of the Rice Tariffication Act. In 2018 and 2019, we recorded the lowest poverty rate, unemployment rate, and underemployment rate in many decades, thanks in the large part to our Build Build Build Program.” Chua stated.

 

The government also maintained a strong fiscal position, with a 2019 revenue-to-GDP ratio of 16.1 percent of GDP, the highest since 1997, and a national government debt-to-GDP ratio of 39.6 percent, the lowest since 1986, given the available data. We received our highest-ever credit rating of BBB+, one notch below the A-rating category.

In Chua’s speech, he noted that NEDA will continue to work hard to restore the confidence, growth trajectory, and enable each and every Filipino to attain these aspirations: matatag, maginhawa at panatag na buhay. 

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