The Philippine economy managed to grow a little bit faster in the first three months of 2018 compared to the previous period despite slower rise in household consumption in the wake of higher consumer inflation.
The country’s gross domestic product (GDP) expanded by 6.8 percent in the first quarter of the year from the same period last year. That compares to a revised 6.5 percent growth in the last three months of 2017. In the first quarter of 2017, GDP also rose by 6.5 percent.
The economy’s strong showing comes amid a slowdown in personal consumption, the biggest component of the GDP. Personal consumption spending rose by only 5.6 percent in the first three months of the year compared to 6.2 percent in the fourth quarter to 2017 and 5.9 percent in the first quarter of 2017.
Other components of the economy – government spending and business investments – more than made up for the slowdown in consumption growth. Public expenditures rose by 13.6 percent in the first quarter of 2018 compared to 12.2 percent in the fourth quarter of 2017 and 0.1 percent in the first quarter of 2017. Investments also expanded by 12.5 percent, up from 8.3 percent in the last three months of 2017 and 11.4 percent in the first quarter of 2017.
Consumer price inflation, or the pace of increases in consumer goods, surged in the first quarter of the year from 2.9 percent in the first quarter of 2017 to 3.8 percent in the same period in 2018. Consumer prices rose as world crude oil prices also moved up and the Philippine government began to implement the Tax Reform Acceleration and Inclusion (TRAIN) law which imposed higher excise taxes on petroleum products.
Ernesto Pernia, the economic planning secretary, said the impact of the TRAIN law on inflation was minimal, estimating it at only 0.4-0.7 percentage points.
However, he acknowledged that higher inflation dragged down economic growth. “If not for first quarter of 2017 to first quarter of 2018 increase in inflation, our GDP growth could be well within the 7-8 percent target. Inflation is the spoiler,” he said.
Still, the Philippines continued to be one of the fastest-growing economies in East Asia. The country’s economic performance under President Rodrigo Duterte also looks better compared to GDP growth under previous Philippine presidents. (See infographic)
Pauline Macaraeg is a data journalist and Elyssa Christine Lopez is a staff writer of Entrepreneur PH