econ - Where did the growth come from? GOOD NEWS: THE...

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Where did the growth come from? GOOD NEWS: THE ECONOMY APPEARED to show overall improvement in the second quarter, bucking recessionary trends worldwide. The second-quarter growth figures released last week indicate that we have managed to avert a recession, meaning, we were able to avoid having two quarters of successive contraction of the economy. The data show a rebound in the second quarter (2.4-percent GDP growth from Q1) after the first-quarter contraction (-2.1- percent growth from Q4 2008). The year-on-year growth rate (that is, comparing with the same quarter last year) was 1.5 percent. One is naturally led to ask where this growth came from, as it would tell us how such growth must have impacted on the lives of common Filipinos. I, thus, examine the growth data more closely below. Government-driven Government spending clearly drove the economy’s growth in the second quarter, helped by a slight pickup in consumer spending which, nonetheless, remained sluggish. Note that there are four sources of demand for the economy’s production of goods and services: Private consumption, government consumption, investments (by both government and private firms) and foreign demand for our exports. Investment spending continued to shrink (-9.8 percent). Exports fell even more steeply than before (-16 percent, a steeper drop than the previous quarters’ -11.5 and -14.7 percent). Private consumption grew a measly 2.2 percent, a far cry from the 4- to 6-percent growth it had been posting for many years. But government consumption spending grew by a brisk 9.1 percent which, even as it actually accounts for a mere 8 percent of GDP, helped offset the steep falls in investments and exports nonetheless. Even more telling indication of the government’s hand in eking out the slight growth in the second quarter was how the nearly 30-percent growth in public construction managed to hold the contraction in investments to single-digit level. But investment in durable equipment had
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econ - Where did the growth come from? GOOD NEWS: THE...

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