Philippine economic growth, as measured by Gross Domestic Product or GDP 2015 Q1, registered the slowest expansion in three years at 5.2 percent during the first quarter. Investors immediately reacted to the disappointing numbers resulting in a 1.23 percent drop in the Philippine Stock Exchange Index (PSEi) yesterday to 7,505.03, the lowest level in four months.
According to Economic Planning Secretary Arsenio Balisacan, economic expansion during the first three months of the year was weighed down by a drop in exports and weak government spending.
The GDP 2015 Q1 5.2 percent expansion was way below market expectations of a 6.6 percent expansion based on a median forecast by a Bloomberg survey and the official government target of 7-8 percent for 2015.
In addition the figure is significantly lower the revised 6.6 percent growth last quarter and marginally inferior to the 5.6 percent growth registered in the first quarter of 2014. The latest GDP figure is also the slowest expansion since 2011, when the economy grew by a mere 3.8 percent.
Secretary Balicasan explained that the slowdown in public construction was primarily behind the decline in the first quarter growth. While private construction continued to grow in the same period, it was not enough to offset the deceleration in public spending. Based on numbers released by the Department of Finance (DOF) the government spent P504 billion ($1.2 billion) during the quarter but this was still 13 percent below the programmed spending.
Weak demand for Philippine exports from the country’s major trading partners also contributed to the slowdown. Secretary Balisacan blamed the downtrend in China as well as other emerging economies for the anemic export performance.
In March of 2015, exports grew by just 2.1 percent from 12.1 percent during the same period last year.
Growth came mainly from the expansion of the services sector which accelerated by 5.6 percent. Transport, storage, communication, real estate, trade, manufacturing, and other services all contributed to the first quarter growth.
Agriculture grew by 1.6 percent higher than last year’s anemic 0.6%.
In spite of the disappointing numbers, Secretary Balisacan was optimistic that growth will accelerate in the next few months. “The missed opportunity to have a higher growth (during the first quarter) is not totally forgone as we still expect public spending to pick up for the rest of the year,” he said.
With the first quarter growth figure now released, the Philippines has fallen behind Malaysia and Vietnam in terms of economic expansion for the said period. Last year, the Philippines was the second fastest economy in Asia after growing at 6.1 percent.