PH economy sinks to record low in 2020

The Philippine economy dived to its lowest level in the postwar era last year after shrinking by 8.3 percent in the fourth quarter, the Philippine Statistics Authority (PSA) announced on Thursday.

Claire Dennis Mapa. Photo by John Verdote

In a briefing, National Statistician Claire Dennis Mapa said the October-to-December gross domestic product (GDP) figure was an improvement from the revised 11.4-percent decline in the third quarter, but a reversal of the 6.7-percent expansion a year earlier.

This brought the full-2020 figure to -9.5 percent, which the official called the “lowest since 1946,” when the government started collecting annual GDP data.

The figure is a turnaround from 2019’s 6.0-percent growth and hits the high end of the government’s adjusted forecast of an 8.5- to 9.5-percent contraction. It is also worse than the country’s 7-percent GDP drop in 1984.

It is deeper than the average 9.2-percent full-year contraction projected by analysts surveyed by The Manila Times, Moody’s Investors Service’s 7 percent, the World Bank’s 8.1 percent and the Asian Development Bank’s 8.5 percent; matches S&P Global Ratings’ 9.5 percent; and better than Fitch Ratings’ and the International Monetary Fund’s 9.6 percent.
Net primary income from the rest of the world and gross national income both declined by 27.3 percent and 11.1 percent, respectively, Mapa said.

In a joint statement on the domestic output data, the country’s economic managers — Finance Secretary Carlos Dominguez 3rd, Budget Secretary Wendel Avisado and Acting Socioeconomic Planning Secretary Karl Kendrick Chua — acknowledged that the coronavirus pandemic disrupted the country’s “growth momentum and development trajectory,” but assured that “prospects for 2021 are encouraging.”

“With the continuous calibrated reopening of businesses and mass transportation, and the relaxation of age-group restrictions, we will see more economic activity in the months ahead,” the officials said.

“This will lead to a strong recovery before the end of the year, when the government will have rolled out enough vaccines against Covid-19 for a majority of our people,” they added.

“The Duterte administration’s efforts to increasingly open the economy while taking resolute steps to fast-track the vaccination program and keep the Covid-19 caseload to the lowest level possible, would boost business and consumer confidence that are crucial to a robust economic recovery,” the managers said.

“All of these efforts to contain the coronavirus and revive the economy will allow us to prevent long-term economic scarring and productivity losses and recover to the pre-pandemic level by mid-2022,” they added.

Earlier, Dominguez, Avisado and Chua, as members of the interagency Development Budget Coordination Committee, estimated that the economy would grow by 6.5 to 7.5 percent this year and by 8 to 10 percent in 2022.

Meanwhile, analysts said in separate statements that, despite the managers’ optimistic outlook, growth prospects remained challenging.

“Mobility restrictions, albeit less restrictive than before, are still in place. The labor market is still weak, with the unemployment rate at 8.7 percent in Q4 (fourth quarter). Real time indicators have also been softening after a brief uptick in December last year on back of the holiday season,” ANZ Research said.

Fiscal spending this year would have to be more rigorous, it added, noting that while this year’s P4.5-trillion budget is expansive in size and scope, “its effective delivery will be of seminal importance.”

ING Bank Manila senior economist Nicholas Antonio Mapa said he expected GDP to still contract until the first quarter of 2021 before growing by 13 percent in the second, mainly on base effects.

Household spending, which is the main growth engine of the economy, is likely to stay in low gear while capital is not expected to make a “significant comeback,” he added.

“With only a modest pickup in government outlays expected in 2021 and with the trade balance forecast to remain in deficit, we do not see a stark pickup in economic activity, with GDP growth powered mainly by base effects with the economy still lacking substantial momentum to drive growth back to the 6-percent level.”

Source: ManilaTimes