The Philippine economy grew by 6.5% y-o-y in the 2nd quarter of this year, marginally higher than the growth rate of 6.4% achieved in the 1st quarter. This was primarily due to the growth of the agricultural sector, which grew by 6.3% y-o-y, much higher than the 2.0% decline in the previous year. The country’s industrial sector expanded by 7.3% y-o-y while the growth of the services sector decelerated to 6.1% from the 8.2% growth rate figure achieved during the same period of the previous year.
The country’s GNP (which includes net factor income from abroad) increased by 6.8% y-o-y during the 2nd quarter, primarily because net primary income from the rest of the world expanded solidly by 8.6%, higher than the 6.1% growth recorded during the same period of the previous year.
The growth of household final consumption expenditures slowed down to 5.9% in 2Q, lower than the 7.5% figure achieved during the same period of the previous year. Government final consumption expenditures expanded by 7.1%, lower than the 13.5% figure achieved during the same period of the previous year. Capital formation grew by 8.7% y-o-y, marginally higher than the 7.9% figure achieved during the 1st quarter of this year, but noticeably weaker than the double-digit growth figures recorded during all the quarters of 2015 and 2016.
There is a need to monitor the quality and sustainability of the country’s growth performance as the important drivers of economic growth – consumption & capital formation – have noticeably decelerated in terms of growth rate. On the other hand, the more volatile component (due to weather conditions and other factors) – agriculture – was the component that pushed the 2Q GDP growth rate marginally higher.
Improvement in the country’s GDP growth rate towards the 7% level is possible in the future if the government fully implements its infrastructure spending program and if the government is able to pass the comprehensive tax reform program.