Philippine Economy Grows by 6.5 Percent in the Second Quarter; 6.4 Percent in the First

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HIGHLIGHTS

Second Quarter 2017

Philippine Economy Grows by 6.5 Percent in the Second Quarter; 6.4 Percent in the First Half of 2017

Gross Domestic Product (GDP) grew by 6.5 percent in the second quarter of 2017 and 6.4 percent in the first half of the year. Manufacturing, Trade, and Real Estate, Renting, and Business Activities were the main drivers of growth for the quarter.

Among the major economic sectors, Industry recorded the fastest growth at 7.3 percent. Services slowed down to 6.1 percent as compared with the 8.2 percent growth posted in the same quarter of the previous year. Meanwhile, Agriculture recovered with 6.3 percent growth from the 2.0 percent decline in the previous year.

Net Primary Income from the Rest of the World (NPI) grew by 8.6 percent as compared with the 6.1 percent growth recorded in the same quarter of the previous year. As a result, Gross National Income (GNI) posted a growth of 6.8 percent.

On a seasonally adjusted basis, GDP posted a quarter-on-quarter growth of 1.7 percent, higher as compared with the previous quarter’s 1.3 percent growth. Likewise, GNI grew quarter-on-quarter by 1.9 percent, the fastest since the fourth quarter of 2015. The entire Agriculture grew quarter-on-quarter by 1.6 percent while Industry and Services expanded by 2.1 percent and 1.5 percent, respectively.

With the country’s projected population reaching 104.5 million in the second quarter of 2017, per capita GDP grew by 5.0 percent. Meanwhile per capita GNI and per capita Household Final Consumption Expenditure (HFCE) grew by 5.3 percent and 4.4 percent, respectively.

PRODUCTION SIDE

Agriculture, Hunting, Forestry and Fishing (AHFF)

The AHFF, which contributed 7.8 percent to total GDP, grew by 6.3 percent in the second quarter of 2017. This contributed 0.5 percentage point to the 6.5 percent GDP growth in the second quarter of 2017.

Agriculture expands

The agriculture industry, which contributed 84.0 percent to the total AHFF sector, went up by 7.9 percent during the reference quarter.

The industry’s growth were contributed by the growth of subsectors led by Palay which grew by 11.7 percent; Corn, with 45.9 percent; Sugarcane, with 157.2 percent; Poultry with 8.3 percent; and Agriculture activities and services, with 4.5 percent growth.

Meanwhile, the growth was pulled down by the declines in: Mango, by 10.0 percent; Coffee, by 12.1 percent; and Livestock, by 1.4 percent.

Forestry recovers

Forestry grew by 32.2 percent in the second quarter of 2017 from a decline of 27.5 percent from the previous year.

Fishing contracts

Fishing, which contributed 15.3 percent to total AHFF, registered a 2.9 percent drop from previous year’s level. There were notable contractions from tiger prawn, roundscad and yellowfin tuna during the reference quarter.

Industry

Industry decelerates

The Industry sector expanded by 7.3 percent in the second quarter of 2017. This was lower than the 7.6 percent growth in the same quarter of the previous year. Industry, which shared 34.1 percent to the GDP for the quarter, contributed 2.5 percentage points to the 6.5 percent GDP growth. Of the 7.3 percent growth in Industry, Manufacturing dominated the contribution with 5.2 percentage points during the quarter.

Mining and Quarrying rebounds

Mining and Quarrying (MAQ) recovered in the second quarter of 2017 as it grew by 13.7 percent from a contraction of 4.0 percent in the previous year. Other non-metallic mining, the main contributor to the growth of the sector, expanded by 73.8 percent. Other contributors to the upturn of the sector were Nickel mining, and Stone quarrying, clay, and sandpits.

On the other hand, the rest of MAQ’s subsectors suffered a setback: Crude oil and natural gas extraction by 4.2 percent, Gold mining by 10.4 percent, Copper mining by 21.9 percent, Other metallic mining by 23.6 percent, and Chromium mining by 95.0 percent.

Manufacturing contributes highest to GDP growth

Manufacturing contributed the highest to the country’s GDP with its 7.9 percent year-on-year growth.

Among the industries under Manufacturing, Radio, television and communication equipment and apparatus, which grew by 17.5 percent, led the growth of the sector with 2.7 percentage points. Other contributors to the growth were: Food manufactures with 5.2 percent growth; Fabricated metal products with 88.9 percent growth; Petroleum and other fuel products with 24.2 percent growth; and Non-metallic mineral products with 13.6 percent growth.

On the other hand, the following industries posted declines and pulled down the growth of the sector: Chemical and chemical products declined by 3.8 percent; Textile manufactures by 3.4 percent; and Rubber and plastic products by 0.5 percent.

Construction slows down

The Construction industry grew by 6.3 percent in the second quarter of 2017, slower compared with the 13.5 percent growth recorded in the previous year. The growth was driven by the increase in Public Construction but was weighed down by the modest growth in Private Construction.

Electricity, Gas and Water Supply (EGWS) eases

Electricity, Gas and Water Supply posted a 2.4 percent growth during the second quarter of 2017, slower as compared with the 10.3 percent growth in the same period of the previous year. The growth was mainly driven by Electricity as it slowed down to 3.0 percent from 11.3 percent in 2016.

The Water subsector recorded a 0.1 percent growth, slower compared with the 5.8 percent growth in the same period in 2016. Meanwhile, Steam declined by 5.0 percent during the period as compared with previous year’s growth of 1.0 percent.

Services

Services drives GDP growth

Among the three major economic sectors, Services remained the main driver of the economy, contributing 3.5 percentage points to the total GDP growth. The sector posted a growth of 6.1 percent in the second quarter of 2017. The growth, however, was slower than the 8.2 percent growth recorded in the previous year. All subsectors, led by Trade, Real Estate, Renting and Business Activities, and Other Services contributed positively to the sector’s growth.

Transportation, Storage and Communication (TSC) slows down

Transportation, Storage and Communication (TSC) posted a 3.5 percent growth, albeit slower compared with the 7.0 percent growth posted in the previous year. Land, which shared 23.9 percent to the entire TSC sector, was the top contributor to the 3.5 percent growth with 1.0 percentage point. Its growth of 4.3 percent, however, was slower than the 7.6 percent growth in the same period a year ago.

The rest of the subsectors also contributed positively to the growth of TSC: Storage and Services Incidental to Transport, 7.9 percent; Communication, 1.4 percent; Air Transportation, 13.6 percent; and Water Transportation, 4.1 percent.

Trade decelerates

Trade and Repair of Motor Vehicles, Motorcycles, Personal and Household Goods recorded a 6.3 percent growth in the second quarter of 2017, slower than the 8.9 percent in 2016. Retail trade, which contributed most to the growth of the sector, grew by 6.4 percent, slower than the previous year’s 8.1 percent growth. Wholesale trade likewise slowed down with 5.5 percent growth as compared with the 11.9 percent growth in the previous year.

Meanwhile, Maintenance and Repair of Motor Vehicles, Motorcycles, Personal and Household Goods posted a 5.7 percent growth as compared with the 13.7 percent growth in the comparable quarter of 2016.

Financial Intermediation continues to grow

The Financial Intermediation grew by 6.1 percent in the second quarter of 2017, slower as compared with the 6.9 percent growth recorded in the same period in the previous year. Banking institutions, which accounts for 41.6 percent of Financial Intermediation, grew by 9.6 percent in the second quarter of 2017, faster as compared with the 7.9 percent growth in the previous year.

On the other hand, Non-Bank Financial Intermediation grew by 3.4 percent, slower compared with the 5.5 percent in the previous year. Likewise, Insurance and Activities Auxiliary to Financial Intermediation both expanded at a slower pace by 4.5 percent and 3.4 percent, respectively.

Real Estate, Renting, and Other Business Activities (RERBA) sustains growth

RERBA continued to grow in the second quarter of 2017 with 7.9 percent growth, however lower than the 8.8 percent growth in the previous year. This growth was largely attributed to Renting and other business activities which grew by 8.0 percent during the period.

Meanwhile, Real Estate posted a double-digit growth of 14.3 percent, higher as compared with the 5.3 percent posted in the same period in the previous year. Ownership of Dwellings recorded a faster growth of 3.0 percent as compared with 2.7 percent growth in the same period of the previous year.

Public Administration and Defense grows

Public Administration and Defense; Compulsory Social Security Schemes recorded an increase of 7.6 percent in 2017, faster than the 6.4 percent posted during the second quarter of the previous year. The implementation of the second tranche of the salary adjustment under Executive Order 201 S. 2016 which increased the base pay of government employees and uniform and military personnel contributed to this increase. Moreover, creation and filling up of positions by other government agencies improved the sector.

Education drives Other Services (OS) growth

Other Services posted 5.0 percent growth in the second quarter of 2017, slower compared with the 9.0 percent growth recorded in the same quarter of the previous year. Education, accounting for 43.3 percent to Other Services, was the top contributor to the growth of the sector with 3.2 percentage points. It grew by 7.7 percent during the quarter, maintaining its pace recorded in the previous year. It was followed by Hotels and Restaurant, which grew by 10.1 percent. Other subsectors also posted positive growth: Health and Social Work, with 4.5 percent; Other Service Activities, with 5.4 percent; Sewage and Refuse Disposal Sanitation and Similar Activities, with 3.2 percent.

On the other hand, Recreational, Cultural and Sporting activities pulled down the growth of the sector as it declined by 2.7 percent in the second quarter of 2017.

EXPENDITURE SIDE

Household Final Consumption Expenditure (HFCE) slows down

The household expenditure grew by 5.9 percent in the second quarter of 2017. This was slower than the 7.5 percent growth in the same quarter of 2016.

Food and Non-alcoholic Beverages, sharing 41.2 percent of the total household expenditure, decelerated to 6.0 percent compared with the 7.4 percent growth recorded in the previous year. Miscellaneous Goods and Services, the next top contributor of HFCE, grew by 6.2 percent. This was slower than the 7.7 percent in 2016.

Aside from the abovementioned expenditure items, the other top contributors to the growth of HFCE were: Housing, water, electricity, gas and other fuels, 6.6 percent growth; Transport, 7.6 percent, compared with the 10.8 percent growth posted in the previous year; and Restaurants and hotels, 11.4 percent, compared with 9.0 percent of 2016.

On the other hand, Recreation and culture pulled down the growth of HFCE with 1.1 percent decline compared with 14.8 percent growth posted in 2016.

Government Final Consumption Expenditure (GFCE) decelerates

Government Final Consumption Expenditures recorded a growth of 7.1 percent in the second quarter of 2017. This was slower than the 13.5 percent during the same period in 2016. The slowdown was due to the decline in the maintenance and other operating expenditures of various government line agencies and the absence of election-related expenditures during this period.

Private Construction weighs down Total Construction Investments

Investments in Construction grew by 7.3 percent in the second quarter 2017, slower compared with the 17.9 percent growth in the previous year. Private Construction, which accounted for 63.3 percent of total construction investments, grew by 4.7 percent, slower compared with the 10.8 percent growth in the same period in 2016. Meanwhile, Public Construction grew by 12.0 percent, slower compared with the 33.5 percent growth in 2016.

Investments in Durable Equipment relaxes

Investments in capital formation for Durable Equipment grew by 8.7 percent in the second quarter of 2017. Increased investments were registered in ten (10) out of twenty types of fixed asset investments.

The following subsectors contributed to the increase in investments: Road vehicles, grew by 12.0 percent, lower than last year’s 48.3 percent; Telecommunication & sound recording/reproducing equipment, registered a growth of 25.4 percent, higher than the previous year growth of 10.1 percent; Air Transport, posted a 361.3 percent growth, soared from last year’s decline of 60.5 percent; Other miscellaneous durable equipment, expanded at 18.0 percent, lower than the recorded 36.0 percent last year; and Mining and construction machineries, grew by 18.9 percent, higher than the previous year growth of 14.3 percent.

Meanwhile, the following subsectors contracted: Other specialized industrial machineries, 16.7 percent; Railway transport, 84.8 percent; Other electrical machinery and apparatus, 2.6 percent; Metal working machineries, 11.1 percent; and Water transport, 8.0 percent.

Investments in Breeding Stocks and Orchard Development (BSOD) accelerates

In the second quarter of 2017, capital formation for Breeding Stocks and Orchard Development accelerated to 4.5 percent, higher than the 3.6 percent growth posted during the same period in 2016

Intellectual Property Products (IPP) surges

Intellectual Property Products surged to 68.3 percent in the second quarter of 2017 compared with the 34.2 percent recorded during the same period last year. The growth can be attributed to the increased in investments on computer software and databases.

Changes in Inventories posts withdrawals

Changes in Inventories logged a total of Php 5.0 billion withdrawals in the second quarter of 2017 as compared to the lower withdrawals of Php 1.3 billion in the same period of 2016. Agriculture brought these withdrawals in the quarter.

Exports of Goods expands

The country’s total Exports of Goods growth continued to expand with 23.0 percent in the second quarter of 2017.

The following commodities contributed to the growth of total Exports of Goods: Component/Devices (Semiconductors) with 24.9 percent; Control Instrumentation with 251.4 percent; Electronic Data Processing with 20.7 percent; Office Equipment with 60.8 percent; and Ignition Wiring Sets with 22.8 percent.

Meanwhile, the following commodities pulled down the growth of the sector: Consumer Electronics, 27.6 percent; Articles of Apparel and Clothing Accessories, 26.6 percent; Telecommunication, 9.7 percent; Medical/Industrial Instrumentation, 51.3 percent; and Pineapple and Pineapple Products, 14.2 percent.