The Philippine Gross Domestic Product (GDP) reached its highest growth at 7% in the second quarter (Q2) of the year, according to the Philippine Statistics Authority (PSA).
The expanded GDP surpassed the reported 6.8% growth from the first three months of 2016.
The PSA also announced a higher GDP increase in this year’s Q2, as compared to last year’s 5.9% during the same period.
According to the agency, the biggest growth at 4.8% came from the Services sector particularly in trade, real estate, and other services. This was followed by the 2.3% from the Industry sector.
Agriculture, on the other hand, continued its decline from -0.1% in 2015 to -2.1 percent for Q2 2016. Catalysts for decreased production are mainly due to El Niño, with the National Economic and Development Authority (NEDA) expecting continued reduction with La Niña this rainy season.
The GDP, GNP and other national income accounts can be measured in two ways. It can be through the production approach, and the other is through the expenditure approach.
The production approach sums up the total income of the following productive sectors:
1. Agriculture, Fishery, and Forestry
On the other hand, the expenditure approach covers the following expenditures:
1. Personal Consumption Expenditure – public (household)
2. Government Consumption – private
5. Statistical Discrepancy
Both methods yield the same GDP total. To get the Gross National Product (GNP), the Net Factor income from the rest of the world (NFI) is added to the GDP total. Put simply, the NFI is made up of OFW remittances.
The bigger the growth rate, the healthier the economy. This will in turn attract more foreign investors and bring more employment opportunities in the country.
GDP growth for the Duterte administration
The GDP growth is expected to increase by a more realistic 6% to 7% within the year under President Rodrigo Duterte, having lowered the former Aquino administration’s target of 6.8% to 7.8%.
The “conservative” target was due to the “tapering effect of election spending, slow agricultural output due to El Niño, weak infrastructure due to seasonality, and weak external trade,” Budget Secretary Benjamin E. Diokno told the Philippine Daily Inquirer.
The business sector’s optimism with the new administration is proven by Bangko Sentral ng Pilipinas’ (BSP) Business Expectations Survey conducted April 1 to May 17.
The increase of the overall Confidence Index (CI) went from 41.9% in the first quarter, to 48.7% in the second quarter of 2016.
With the growing confidence from investors, the Philippines will likely continue to exceed expectations with its fast-growing GDP.
Socioeconomic Planning Secretary and NEDA Director-General Dr. Ernesto M. Pernia stated that the Philippines remains to lead the fastest economic growth for the second quarter of 2016. Other countries that follow are China with 6.7%, Vietnam at 5.6%, Indonesia with 5.2%, and Malaysia at 4.0%.
“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,” Pernia added.
More business opportunities
President Duterte’s eight-point economic agenda aims to continue the macroeconomic policies set by the previous administration, and to maintain the policies that led to the country’s biggest period of economic growth since the 1970s.
Among these plans are tax reforms and reduction in business restrictions, which are intended to attract more foreign investors.
Plans to improve the tax system and add more budget to infrastructures will also work effectively with the administration’s poverty reduction plans.
According to the Inquirer, poverty rate is expected to decrease from this year’s 25% to 16%, at the end of President Duterte’s term in 2022. The target is to reduce the percentage of poor Filipinos by 1.25% to 1.5% each year.