MANILA, Philippines – Although inflation has cooled from its peaks in 2022 and early 2023, high prices continued to slow down the rate at which household spending grew in the second quarter of 2024.
Household final consumption expenditure contributed the most to the Philippine economy’s impressive Q2 2024 growth, making up half or 3.2 percentage points of the 6.3% gross domestic product (GDP) growth.
But despite its outsized role in economic growth, household spending posted a modest year-on-year growth of 4.6%, which was even slower than the 5.5% growth in the comparable period in 2023.
Household spending also shrank in some cases, registering -0.1% in Q2 2024, based on quarter-on-quarter growth rates. The top contributors to the contraction were restaurants and hotels (-15.2%), clothing and footwear (-5.2%), and health (-1.7%), according to the Philippine Statistics Authority’s Q1 2022 to Q2 2024 Seasonally Adjusted National Accounts of the Philippines report.
National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan said the “anemic” growth was due to the impact of high inflation and high interest rates.
“Inflation is a very strong determinant of household spending,” the country’s chief socioeconomic planner said on Thursday, August 8.
According to Balisacan, the government expects household consumption spending to improve in the coming quarters. One first step is reining in inflation – which spiked beyond the government’s target range in July – and bringing it back to its downward trajectory.
The NEDA chief also said that the high interest rates set by the Bangko Sentral ng Pilipinas have been affecting growth. In its fight to bring inflation under control, the central bank has held its key policy rate at a high 6.5% since October 2023, although that may change in its upcoming August 15 monetary policy meeting.
“Our growth performance could have been even more impactful on all Filipinos if not for the high inflation and interest rates that the country experienced in the last two years. Considering the lagged effect of interest rate hikes that the Bangko Sentral ng Pilipinas carried out in response to the high inflation in 2022 and early 2023, we estimate that economic growth could have been over half a percentage point higher in 2023 if such rate hikes did not materialize,” Balisacan said.
He added that the government has to continue to keep the labor market robust and generate higher quality jobs. (READ: Unemployment nears record low, but higher underemployment shows need for better jobs) – Rappler.com
