Economic growth slows on drag from Boracay closure, policy steps

ABS-CBN News

Posted at Aug 09 2018 11:02 AM | Updated as of Aug 09 2018 07:13 PM

Boracay island, April 24, 2018, before the six-month closure. Fernando G. Sepe Jr., ABS-CBN News

MANILA -- Economic growth slowed in the April to June period, falling below forecasts, due to "policy decisions" to ensure a more sustainable expansion, including the 6-month closure of Boracay island, officials said.

Gross domestic product grew 6 percent in the second quarter, from 6.6 percent in the first 3 months of the year. This snapped 10 straight quarters of at least 6.5 percent growth. Economists polled by Reuters predicted a 6.7-percent expansion.

Socioeconomic Planning Secretary Ernesto Pernia said inflation had a "similar effect" in the second quarter as in the first quarter. He had flagged it as a growth "spoiler."

"This growth is less than what we had hoped for," Pernia told reporters. "To be fair and put things in proper context, the slowdown is partly due to policy decisions undertaken that are expected to promote sustainable and resilient development."

With first half growth at an average 6.3 percent, Pernia said the economy would need to expand by 7.7 percent in the second half to meet the low end of the government's 7 to 8 percent goal for the year.

"We will have to double time our efforts in terms of encouraging the sectors to be more productive and efficient in their activities," he said.

The Philippines. however. is still among the fastest-growing economies in Asia, behind Vietnam's 6.8 percent, China's 6.7 percent and ahead of Indonesia's 5.3 percent, Pernia said.

POLICY DECISIONS

The six-month closure of Boracay which started in April "made a dent on the economy" as the island is the country's prime tourist spot, Pernia said.

He also cited the continued closure of several mines, the strict enforcement of fisheries laws in Laguna Lake and an "almost stagnant" agriculture sector as drags on growth.

"These policy decisions are actually quite prudent and judicious," he said.

Boracay's closure was a "good hit by the President" and services is expected to recover when the island reopens later this year. Authorities launched a massive cleanup after Duterte likened its polluted beaches to a "cesspool."

INFLATION PRESSURE

The second quarter growth figures came hours before the Bangko Sentral ng Pilipinas' scheduled policy meeting, where analysts penciled in a 50-basis point increase in the benchmark lending rate.

Ahead of Thursday's meeting, BSP Governor Nestor Espenilla reiterated the regulator's "firm commitment" to meet its 2 to 4 percent inflation target for the year.

Consumer prices rose 5.7 percent in July, exceeding the BSP's goal for the fifth straight month and quickening for the seventh straight month. It was also the highest in data since January 2013.

A healthy increase in government spending, rising foreign direct investment and gains in foreign exchange remittances should support the economy's momentum and allow for further policy tightening by the central bank, economists said.

-- with a report from Reuters

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