Neda chief Chua: ECQ impact on economy ‘more severe than expected’

The Philippines is bracing for an even worse-than-expected drop in the gross domestic product (GDP) in the second quarter as the country’s chief economist on Friday said the COVID-19 lockdown inflicted more pain into the economy than earlier projected.

But as the economy gradually opened up under less-restrictive quarantine, Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua told a virtual press briefing that recovery was underway during this third quarter.

Chua, who heads the state planning agency National Economic and Development Authority (Neda), said the latest economic data covering the months of April and May showed the impact of the enhanced community quarantine (ECQ) imposed in Luzon and other parts of the country with high COVID-19 infection since mid-March was “more severe than expected.”

Earlier Neda estimates showed that the economy shed P1.1 trillion or 5.6 percent of GDP across the agriculture, industry and services sectors during the first 45 days of the ECQ—said to be one of, if not the most stringent COVID-19 lockdowns in the region.

While Chua reiterated that the second-quarter GDP will be “more negative” than the 0.2-percent decline during the first quarter, the Neda chief said he did not know yet “to what extent it will be worse.”

In April, 7.3 million Filipinos were jobless, jacking up the unemployment rate to a 15-year high of 17.7 percent.

Some economists already projected sharper second-quarter contraction reaching double-digits in percentage, sliding the economy into a technical recession.

Chua said the government always revisited the economic team’s projection in May of 2-3.4 percent GDP contraction for the entire year whenever new data came in.

“Once we prepare the final budget proposal, there could be some adjustments,” Chua said, referring to the proposed P4.3-trillion 2021 national budget to be submitted to Congress by August.

Moving forward, Chua was optimistic about improving economic activity especially after 75 percent resumed operations last month, subject to minimum health standards.

The latest preliminary Philippine Statistics Authority (PSA) data on external trade in goods released Friday showed that merchandise exports dropped 35.6 percent year-on-year to $3.9 billion in May, although the value of Philippine-made products sold overseas that month rose from $2.8 billion last April.

Imports slid 40.6 percent year-on-year to $5.9 billion, even as their value improved from April’s $3.3 billion.

As such, total external goods trade declined 38.7 percent year-on-year to $9.8 billion last May, although bigger than the $6.1-billion in products exchanged between the Philippines and its foreign trading partners in April.

The trade balance remained at a deficit as imports still exceeded exports, which at $1.9 billion in May was narrower than the $3.6 billion posted a year ago but wider than April’s $448.7 million.

Citing these May external trade data, Chua said that “although still negative compared to last year, this represents slight improvements compared to last month.”

“The slower decline in trade performance is a welcome indication that economic activity has started to pick up with the relaxation of quarantine measures in certain areas, the gradual reopening of business, and the restarting of production in both the country and its trading partners,” Chua said.