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The gross domestic product of the Philippines grew 5.5 percent in the second quarter, the slowest in 17 quarters, because of a drought that hit the farm sector and delayed implementation of 2019 budget that affected infrastructure spending.

The Philippine Statistics Authority said GDP growth slowed from 5.6 percent in the first quarter and 6.2 percent a year ago.

“This means that we will have to grow by an average of at least 6.4 percent in the second half to reach the low-end of the full-year growth target of 6.0 to 7.0 percent in 2019,” SocioEconomic Planning Secretary Ernesto Pernia said in a statement.

Pernia said the second-quarter growth was anticipated because of the challenging times. “The past year, we had enumerated the major ones that we thought would impact our economic performance, namely the El Niño phenomenon, the increasing protectionism in advanced economies, and the election ban on construction activities,” he said.

Pernia said the El Nino phenomenon was responsible for the contraction in the output of the water-sensitive crop such as palay which contracted by 5.5 percent and corn which declined by 8.4 percent.

“Also on the El Niño phenomenon, we note that though we only experienced a mild El Niño, the impact on water supply, particularly in Metro Manila, was severe. And this adversely affected consumer confidence, resulting in a slowdown in household consumption, growing by 5.6 percent in the second quarter, compared with 6.2 percent growth in the first quarter,” he said.

“The water crisis appears to have resulted from poor coordination between the government [with more than thirty agencies in charge] and the private distributors. Once again, we call for the creation of an apex water body to handle management and generation of water resources, and another one to regulate water use. We envision a setup similar to the energy sector, where there is a Department of Energy and an Energy Regulatory Commission,” Pernia said.

Pernia, who serves as the director-general of the National Economic and Development Authority, said the growing protectionist stance in the advanced economies was having a moderating impact on the IT-BPM sector.

Data showed that exports of miscellaneous services only grew by 1.3 percent, compared to double digits three years ago.

“Note that the sector is also being adversely affected by the rise of artificial intelligence. We need to encourage the sector to re-tool and reform in order to service the higher value-added business processes,” Pernia said.

He said growth was also affected by the anticipated ban on public works and other spending, leading up to the May 2019 elections.

“The weak economic performance during the second quarter of 2019 is the continuing effect of that delay in the passage of the 2019 budget, coupled with the election ban. Government consumption spending has slowed down; capital formation has declined rather sharply, particularly on the government’s side. Public construction dropped by 27.2 percent for the second consecutive quarter, which offset the growth brought in by private construction,” Pernia said.

“For this reason, we are calling for the timely passage of the national budget for fiscal year 2020, so as not to derail next year’s economic growth. This is crucial to the delivery of the government’s promises such as the completion of the 'Build, Build, Build program' and the full implementation of the country’s social development programs, such as the free tertiary education, the universal health care, and the expanded conditional cash transfer, among others,” said Pernia.

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