Socioeconomic Planning Secretary

Press Conference on the Performance of the Philippine Economy

for the Fourth Quarter and Full-Year of 2019

January 23, 2020 | 10:00 a.m.

Hampton Conference Hall, Second Floor, Astoria Plaza, Pasig City

Our partners from the Philippine Statistics Authority;

Colleagues in government;

Friends from the media;

Ladies and gentlemen;

Good morning.

As announced by the Philippine Statistics Authority, the growth of the Philippine economy continued to accelerate in the last quarter of 2019 to 6.4 percent from the revised 6.0 percent in the previous quarter and 6.3 percent in the last quarter of 2018. This is in line with the median forecast of the private sector.

Compared with other major economies in the region that have already released their GDP growth in the fourth quarter, the Philippines likely ranked second only behind Vietnam’s 7.0 percent, and higher than China’s 6.0 percent growth rate in the fourth quarter.

On the demand side, growth was driven by the ramping up of government spending after the budget delay in the first half of 2019. Public construction significantly increased by 34% in fourth quarter 2019, with the completion of projects of the Department of Public Works and Highways (DPWH), payment for the acquisition of right-of-way, and construction of government buildings.

On the supply side, the 7.9 percent growth in the services sector was mainly driven by the acceleration of public administration and defense, trade, and other services. However, this was partly tempered by the slowdown in agriculture. In particular, there were production declines in corn, sugar and banana primarily because of delayed planting and harvesting due to the El Nino phenomenon during the first half of 2019. Livestock growth also moderated, following the strict implementation and monitoring of movements of live animals across provinces as local government authorities worked to avert the spread of the African Swine Fever. On the upside, improved output was recorded for coconut and the fishing subsector as higher demand in some regions induced some ponds to resume operations. Good weather conditions also allowed better fish catch and more fishing trips.

This fourth quarter 2019 outturn brings the full-year 2019 economic growth to 5.9 percent, the slowest in eight years and slightly below the low-end of the 6.0-6.5 percent revised target of the government for the year.

We have seen our economy facing several challenges right at the start of 2019 as the budget impasse led to delays in the implementation of government programs and projects. Adding to the problem was the election ban on certain, mainly infrastructure, projects. Therefore, we are thankful that our colleagues in Congress and the Department of Budget and Management ensured the timely passage of the 2020 General Appropriations Act and also approved the validity extension of the 2019 fiscal program until the end of this year — both of which are critical to our efforts to spur economic growth. Going forward, there is a need to reconfigure budget and disbursement protocols that are more robust.

We now need to significantly improve the absorptive capacity of government agencies for faster implementation and completion of key social programs and infrastructure projects. We also need to swiftly address issues such as the difficulty in the acquisition of right-of-way, delays in procurement, restrictive auditing rules, and skills shortages.

Moreover, we need to effectively manage the country’s inflation to boost household consumption by proactively addressing potential supply shocks especially on key agricultural commodities. We must also remain vigilant on the developments in the international oil market with this recent emergence of tensions in the Middle East, which could put upward pressure on domestic oil prices and other energy-related items.

Meanwhile, the continuing eruptions of the Taal volcano and onslaught of typhoons in the latter part of 2019 have brought significant damage in the agriculture and fishery sector in CALABARZON especially. The agriculture department and concerned local government units should fast-track the release of production support and cash/loan assistance programs to the affected farmers and fisherfolk, as well as the implementation of the recovery and rehabilitation plans for the affected areas.

The effects of the El Niño phenomenon also affected our country’s performance in the first half of 2019. Based on the latest monitoring of the Philippine Atmospheric and Geophysical Services Administration, the El Niño-neutral situation will likely continue until the third quarter of the year, with only four to seven tropical cyclones expected to enter the Philippine Area of Responsibility from February to July 2020. The agriculture sector should take advantage of this relatively favorable weather condition to scale up its production, particularly of high-value crops. We also need to re-design our agriculture programs and projects to make them resilient to weather shocks and adaptive to climate change.

The rollout of the programs and projects under the Rice Tariffication Law, including seed distribution, farm mechanization, and extension services should be speeded up, as only around 54 percent of Rice Competitiveness Enhancement Fund were obligated and released as of end 2019. In addition, the provision of unconditional cash transfers for rice farmers who were affected by lower palay prices should also be fast-tracked. Assisting farmers to shift to high-value, short-maturing, high-yielding crops should also be made a priority in agriculture.

Furthermore, we must sustain our disease-control measures amid the continued presence of African Swine Fever in the country since the number of culled pigs has already increased to 136,770.

On the external front, the International Monetary Fund revised its global growth projections downward again to 3.3 percent this year attributed to persisting social unrest, trade uncertainties, rising geopolitical tensions between countries, and worsening climate-related disasters such as bushfires, typhoons, and flooding across the world.

Therefore, we need to sustain our strong macroeconomic fundamentals to withstand external shocks and promote growth over the medium-term. We should also diversify our products and markets as well as establish and improve new and existing trade relations with strategic partners.

The possibility of relocating manufacturing operations of multinational corporations or MNCs due to trade disputes has opened up opportunities. We must now identify specific products for which the country could be an alternative manufacturing base, bearing in mind the comparative advantage for domestic players. The entry of these MNCs and international players could serve as a way to better integrate our domestic industries into the global value chain and bolster our manufacturing growth in the long run.

We also need to pass industrial policies that are propelled by innovation to encourage private investments and increase the efficiency of conducting transactions with government agencies. These include the passage of the Corporate Income Tax and Incentives Rationalization Act and the proposed amendments to the Foreign Investments Act, the Public Service Act, and the Retail Trade Act, to eliminate policy uncertainties that affect the country’s business climate. Also, with the entry of the third telecommunications player this year, the passage of the Open Access in Data Transmission Act should also be expedited to address barriers to entry of data service providers and reduce inefficiencies in network deployment.

Given the rapid advancements in technology that give way to industries in the sharing economy, the government must upend existing rules and adopt a new regulatory framework or approach to adapt to these advancements. Innovations in ride- and room-sharing services, such as those offered by Angkas, Grab, AirBnB, and other similar services need to be encouraged. The government should not be an obstacle to such innovations. We must be able to assess social and economic impacts carefully, strive to understand the new environment and to provide policy responses that are both clear and evidence-based.

We are now in the final stage of the midterm updating of the Philippine Development Plan 2017-2022. We note the many reforms that have been enacted into law. For a number of agencies, these new laws imply additional mandates. Furthermore, there may be a need to build capacities, develop new competencies and systems to fulfill the new mandates.

We are still keen on pursuing further policy reforms over the next three years, primarily: 1.) Remaining tax reform packages 2.) Budget Reform Bill 3.) Amendments to the BOT Law 4.) National Land Use Act 5.) National Competition Policy 6.) Department of Water and Water Regulatory Commission and 7.) National Quality Infrastructure.

Finally, as we see the need to sustain the growth of the economy, amidst a growing population and changing demographics, against a backdrop of challenging global geopolitical, technological and environmental changes, we recognize the importance of improving the capability of government to undertake continuing integrated and coordinated planning and policymaking at all levels and covering all sectors. To this end, we support the recent moves of Congress to strengthen the culture of planning in government. The proposed bills intend to strengthen vertical and horizontal coherence of plans, policies and programs, and the eventual linkage to the budget. This promises to be something that will also ensure continuity of plans to achieve long-term development goals that will benefit even the future generations of Filipinos.

We are optimistic of the prospects ahead of us as we remain committed to put in place better strategies and to deepen reforms so we can get back on a high growth trajectory in the remaining years of the PDP towards realizing our long-term vision of a matatag, maginhawa, at panatag na buhay para sa lahat ng Pilipino, ngayon at sa darating pang panahon.

Maraming salamat at magandang umaga muli!