Gross Domestic Product: A Review
Gross Domestic Product (GDP) is a measure of economic growth. It is the monetary value of all goods and services produced in a country in a certain period. Usually, this is quarterly of annually.
GDP is an imperfect measure of economic performance. It does not measure individual wellbeing and social equity. Other statistics, such as poverty rates, inequality rates and wages provide a better measure of wellbeing.
Philippine GDP in the Second Quarter
The Philippines' second quarter GDP was recently released. According to the Philippine Statistics Authority (PSA), our Gross Domestic Product grew by 7.4%. This was lower than the 8.2% in the previous quarter.
Household spending grew by 8.6% in the second quarter. This was lower than the 10.0% in the previous quarter. This may mean that inflation is starting to hit the spending power of Filipino consumers. Inflation during the second quarter rose from 4.9% in April to 5.4% in May and 6.1% in June. Household spending typically accounts for 60% of GDP on the demand side.
Gross Capital Formation also remained stagnant. On one hand, Construction only grew by 1%. On the other hand, investments in durable equipment grew by less than 2%. The trade balance also widened from 5% to 9.3%.
On the supply side, the service sector grew by 9.7%. This was higher than the 7.0% registered in the previous quarter. Specifically, the retail trade grew by 10.4%. The sale and repair of cars and motorcycles also grew by 28.8%.
The Industry sector put a dampener on growth. It only grew by 6.3% compared to 10.5% in the previous quarter. In particular, manufacturing grew by only 2.1%. Fortunately, the construction sub-sector grew by 19.0%.
Agriculture remained stagnant at 0.2% growth.
Stagflation is on Everyone's Minds
The slow growth Gross Domestic Product may point to stagflation in the second half of 2022. Economic analysts are unanimous in their pessimistic outlook.
Capital Economics, an economic think tank, slashed their Philippine GDP forecast to 6.5%. ING Philippines also believes that GDP will stay at that rate. The analysts cited high inflation and rising interest rates as drags on economic growth.
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