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MIMAROPA’s economy slows down, but posts fastest capital formation growth

The Gross Regional Domestic Product (GRDP) of MIMAROPA grew at a slower pace in 2019 compared with the 8.6 percent growth in 2018. The 3.9 percent growth rate in 2019 was driven by electricity, steam, water, and waste management; wholesale and retail trade; repair of motor vehicles and motorcycles; and financial and insurance activities.

grdp-table

Among the major sectors, Services posted the highest growth rate at 6.0 percent, which is a few notches down from 8.8 percent in 2018. It also kept MIMAROPA’s economy afloat and remained to be the biggest contributor to the region’s economy with a 46.7 percent share in 2019, slightly higher than its 45.8 percent share in 2018.

Five of the Services sector’s eleven sub-industries registered accelerated growth in 2019, which included Wholesale and Retail Trade; Repair of Motor Vehicles and Motorcycles; Human Health and Social Work Activities; Information and Communication; Professional and Business Services; and Real Estate and Ownership of Dwellings.

The Real Estate and Ownership of Dwellings grew by 3.2 percent in 2019 from 2.4 percent in 2018, which may be attributed to the increased value of residential and non-residential buildings from ₱4.50 billion in 2018 to ₱5.35 billion, which indicates higher cost of building, electrical, mechanical, plumbing, among other variables, in the region.

Meanwhile, contributing to the slow growth were Public Administration and Defense and Compulsory Social Activities subsector, which registered a decelerated growth of 11.2 percentage points, or from 19.5 percent in 2018 to 8.3 percent in 2019. This may be attributed to the following:

a. The implementation of Republic Act No. 11199, or the Social Security Act of 2018, mandates the adjustment of maximum monthly salary credit from ₱16,000 to ₱20,000 and a one percentage point increase in the contribution rate every two years starting 2019 from 11 percent to 12 percent and until it reaches 15 percent in 2025.

This increase, although gradual, resulted in an immediate increase in both employer and employee share from 7.37 percent and 3.63 percent, to 8 percent and 4 percent, respectively, starting 2019.

b. The internal revenue allotment (IRA) of all MIMAROPA provinces increased by 8.94 percent, or from ₱6,492 million in 2018 to ₱7,073 million in 2019. The IRA of cities and municipalities also increased by 11.19 percent and 10.20 percent, respectively.

Financial and insurance activities also slowed down from 12.7 percent in 2018 to 10.3 percent in 2019. This may be attributed to the increased total deposit liabilities in the region by 6.52 percent, or from ₱91,148 in 2018 to ₱97,838 in 2019. The loans and receivables of banks in the region also increased by 1.41 percent, or from ₱32,247 million in 2018 to ₱32,701 million in 2019.

As for the other sectors, Agriculture, Forestry, and Fishing accelerated to 4.7 percent in 2019 from 0.9 percent in 2018. This can be attributed to the improvements in the outputs of high value crops (banana, cacao, cashew, coconut, calamansi, onion, and mango) and poultry products in the region.

In 2019, the provinces of Occidental Mindoro, Oriental Mindoro, and Palawan experienced drought due to the El Niño phenomenon. A total amount of ₱959,809,912.02 estimated damages to infrastructure due to the onslaught of tropical cyclones and southwest monsoon was recorded in that year, while a total amount of ₱1,338,481,032.99 estimated damages to agriculture, fisheries, and livestock was also recorded. Nonetheless, the recovery from the adverse effects of typhoons that hit the region and government interventions helped the agriculture and fishing sector increase its value added.

Industry slowed down to 0.9 percent in 2019 from 12.5 percent in 2018 due to the stunning reversal of growth in Construction from 27.2 percent in 2018 to -10.3 percent in the following year; and Mining and Quarrying (MAQ) from 5.2 percent in 2018 to -1.3 percent in 2019. The heavy contraction in the Construction sub-sector may be attributed to a majority of infrastructure projects not completed by implementing agencies, such as an unspent amount of ₱17,008,770,453.54, per a 2019 report from the Commission on Audit. Meanwhile, the decelerated growth of Manufacturing and contracted growth of MAQ accounted for 28.7 percent and 36.8 percent of the sector’s output, respectively, pulling down Industry’s overall growth.

Snapshot

In a nutshell, Services contributed 2.7 percentage points to the region’s growth in 2019, while Agriculture, forestry, and fishing followed with 0.9 percentage point contribution, and Industry accounted for 0.3 percentage point.

Unlike in 2018, the 2019 target in the updated Regional Development Plan (RDP), which was set at a range of 4.7 percent to 5.7 percent, was not achieved. The region hit below the minimum target of 4.7 percent and ended 0.80 percentage point short.

Among 12 regions that posted decelerated growths, MIMAROPA downscaled the most, at 4.6 percentage points. Deceleration in the industry and services sectors weighed heavily on the region’s economy.

Bouncing Back

On a positive note, Gross Capital Formation posted the fastest growth rate at 19.8 percent for the MIMAROPA region in 2019. It was followed by imports of goods and services, at 12.8 percent.

While striving for economic growth, the region continues to recognize and puts premium on the welfare of the people, especially the vulnerable sectors and those in geographically isolated and disadvantaged areas (GIDAs) in the region, as the growth rate for Human health and social work activities indicates.

The following interventions are needed to improve the regional economy and the lives of the MIMAROPAns: ensure the timely completion of priority infrastructure projects; prioritize the delivery of basic social services to conflict-affected areas and vulnerable communities especially those in GIDAs; establish or improve social protection centers in all municipalities; complete the formal recognition of Indigenous Peoples’ claims to their ancestral domain titles and fast-track the issuance of certificate of ancestral domain titles (CADTs); and provide improved public health interventions and prioritize quality education for all shall so that the poor can focus on their immediate and basic needs, especially now that the people are recovering from the pandemic.

Further, in order to comply with the requirements of telecommuting, digital transactions, and online education in the new normal, the internet connectivity in the region should be improved.

Institutions should also be strengthened by fully implementing newly passed laws such as the institutionalization of the Pantawid Pamilyang Pilipino Program, Magna Carta of the Poor, Universal Health Care Law, Tulong Trabaho Act, Universal Access to Free Tertiary Education Act, among others, as well as Executive Order No. 70, which institutes a whole-of-nation approach in addressing communist insurgency.

As for the agriculture and fisheries sector, the regions shall sustain the growth of the sector to generate employment and livelihood opportunities in the rural areas and to increase the sector’s contribution to the regional economy. Empowering the farmers and fisherfolk is crucial in increasing agricultural productivity and profitability, which in turn improve the sector’s economic performance. Among the interventions that can be done to improve agriculture performance are the consolidation of small- and medium-sized farms to achieve economies of scale; development and promotion of export products; continuous improvements to access to credit and financial loans; and provision of crop insurance to small-scale farmers and fisherfolk, among others. Further, the passage of National Land Use Bill to harmonize sector-specific land-use policies and to institutionalize land use planning will be critical in ensuring sustainable and efficient use of land and physical resources.