📷Domini Velasquez | mb.com.ph
BAGUIO – The Philippine government remains confident in achieving its target economic growth of 6 to 7 percent for 2024, despite a lower year-on-year first-quarter performance of 5.7 percent gross domestic product (GDP) growth.
During the business journalism seminar here organized by the Economic Journalists Association of the Philippines over the weekend, Finance Undersecretary and Chief Economist Domini Velasquez believes a growth rate of around 6.1 percent in the coming quarters is achievable.
Velasquez cited household consumption, job market stability, and a potential rise in wages as key factors that could propel economic growth in the coming quarters.
“The first quarter growth is very respectable at 5.7 percent,” Velasquez said, citing data from the Philippine Statistics Authority.
For context, the latest data from the state-run statistics bureau showed that the latest GDP print is higher than the revised 5.5 percent figure reported for the fourth quarter of 2023.
However, the country’s gross domestic product in the first three months through March grew slower year-on-year by 5.7 percent from last year’s 6.4 percent rate.
READ ALSO: PH economy slows down in Q1 2024, PSA says
Velasquez acknowledged areas for improvement, particularly in household consumption, which contributes significantly to the GDP.
Household consumption grew by only 4.6 percent in the first quarter, which is considered low compared to the usual 5 percent growth even during high inflation periods.
The government believes this will pick up as inflation stabilizes and Filipinos become more secure in their jobs.
“More and more Filipinos have jobs now, and the underemployment rate has decreased,” Velasquez said.
The underemployment rate, which refers to people with jobs who are still looking for additional work, has fallen to 11 percent in March from 12.4 percent in February, even lower than pre-pandemic levels. This indicates greater job market stability, potentially leading to increased consumer spending.
Another factor affecting the country’s economic growth is the latest interest rates. During Bangko Sentral ng Pilipinas’ policy meeting last week, the central bank’s Monetary Board maintained the target rates for overnight lending facilities at 7.0 percent, overnight deposits at 6.0 percent, and reverse repurchase (RRP) rates at 6.5 percent.
READ ALSO: Bangko Sentral retains interest rates at 6.5%
While higher rates incentivize saving, Velasquez said the higher interest rates also make it more expensive for private companies to borrow money for business expansion. This could lead to slower business growth in the short term.
Despite these challenges, the government is looking to the next quarters to make up the difference.
“For the next few quarters, [growth is expected to be] around 6.1 percent,” Velasquez said. The Philippines will need to achieve slightly above average growth in the remaining quarters to meet its annual target. (TCSP)
