Why did Philippine

growth drop?
• The Philippine Statistics Authority (PSA) released its
much-awaited report on the size and growth of the
Philippine economy in 2019, as measured by gross
domestic product or GDP.

• Although economic growth last quarter picked up at 6.4%,

for 2019 as a whole, growth clocked in at a mere 5.9%.

• This is low for a couple of reasons. Not only did it just

miss the government’s growth target of at least 6%, it’s
also the lowest growth rate in 8 years (Figure 1). Growth
also slid in 2019 for the 3rd consecutive year.
• Sure, our economy is still growing, and 5.9% is
respectable vis-à-vis the growth of some Asian neighbors.
But for a country with so much potential, 5.9% leaves
much to be desired.
 Decline of investments
• First, we can look at what Filipinos are spending on.

• For every P100 of spending last year, P69 was spent by

you and me on consumption goods like food and clothing;
P29 was spent by private investors on machinery and
equipment; and P12 was spent by government on
officials’ salaries and infrastructure projects. Take away
P10 from total spending, because we imported more than
we exported.
 Decline of investments
• Among these components, arguably the most important
would be private investments, which fuel future growth:
the more we spend on machinery and equipment today,
the more growth we can expect tomorrow.

• Looking at the data, it’s worrisome to see that private

investments failed to prop up growth. In fact, investments
somehow dragged down growth (Figure 2). The last time
this happened was in 2012 or 7 years prior.
 Decline of investments
• Drilling down further, we see that private investments
dropped mostly on account of the poor production of
“durable equipment,” which comprise road vehicles,
telecommunications equipment, mining and construction
machinery, and office machinery.

• Construction projects by the private sector did somehow

counteract this dip in durable equipment. But even private
construction’s contribution to growth fell from the previous
year.
 Weaker industry
• The second way to probe GDP is by looking at the
respective contributions of the economy’s key sectors:
agriculture, industry, and services.

• Last year, for every P100 of national output, P58.4 came

from services, P33.8 from industry, and a mere P7.8 from
agriculture.

• Figure 3 shows that these sectors’ contributions to growth

follow the same order of significance.
 Weaker industry
• Some of these trends come as no surprise. In the past
decade services have always been strong, and
agriculture has always been weak.

• What’s surprising is the sudden weakness of industry,

whose contribution to growth fell to its lowest level since
2011. This comes after years of robust, sizable industrial
growth.
 Weaker industry
• Inspecting industry further, we can see that manufacturing
and construction faltered the most. This, at a time when
the government is pushing for both a Manufacturing
Resurgence Program and an ambitious infrastructure
project called Build, Build, Build.

• Industry’s newfound weakness is unfortunate. Some

economists think industry is still one of the best and
fastest ways to grow our economy: for the same amount
of inputs, industry still produces more valuable output
than services or agriculture.
 Weaker industry
• Other economists, however, contend that services might
prove to be a suitable alternative ladder to growth
nowadays, albeit less productive. After all, a full
resurgence of the country’s industrial sector in the 21st
century is arguably unlikely.