Slowdown during COVID-19 worse than during Marcos era
MANILA, Philippines — The COVID-19 pandemic has not only ended decades of steady growth for the Philippine economy, but also plunged the country into its most serious recession since after World War II and even worse than the 1984 economic crisis that led to the ouster of then-President Ferdinand Marcos.
The interagency Development Budget Coordination Committee (DBCC) confirmed that economic production was worse than originally thought as it downgraded its gross domestic product (GDP) projection from the original forecast of -4.5 percent to -6.6 percent last July.
Beating 1984
The DBCC now expects the country’s P19.516-trillion economy to have contracted by a record 8.5 to 9.5 percent for the whole year, exceeding the 7-percent decline at the height of the 1984 economic crisis.
This means the country’s economic production for the year dropped by around P1.269 trillion from P19.516 trillion in 2019 to an estimated P18.247 trillion this year.
But the Duterte administration’s economic managers expect an economic bounce back next year with 6.5 to 7.5 percent growth and a faster 8 to 10 percent expansion in 2022 as more firms resume operations and more workers return to their jobs.
To support this hope for a return to growth, DBCC chair and Budget Secretary Wendel Avisado said at a press conference on Thursday that the economic team will pitch a record P5.024-trillion cash budget for 2022, President Duterte’s last year in office.
The proposed 2022 national budget, 11.5-percent bigger than the P4.5-trillion 2021 spending plan pending in Congress, “will continue to prioritize funding for health-related responses and measures that will help accelerate economic growth,” Avisado said.
Acting Socioeconomic Planning Secretary Karl Kendrick Chua said the worse GDP projection was a result of the worse-than-expected economic performance during the first three quarters.
GDP shrank by an average of 10 percent in the first nine months as the longest and most stringent COVID-19 lockdown in the region put a halt to 75 percent of the economy at its height.
Also, the string of strong typhoons that devastated parts of the country during the past two months will reduce fourth-quarter GDP by 0.62 percentage points and the full-year output by 0.17 ppt, said Chua, who heads the state planning agency National Economic and Development Authority.
The Philippines is also bracing for a prolonged wet season due to the La Niña phenomenon, which could persist until the first quarter of next year.
The rosier outlooks for 2021 and 2022, on the other hand, were due to expectations that most of the country will be under less restrictive modified general community quarantine by next year and a COVID-19 vaccine would already be available, Chua said.
Finance Secretary Carlos Dominguez III, who heads Duterte’s economic team, said the Philippines can afford to buy vaccines for 60 million Filipinos, amounting to about P73 billion at a price of about P1,200 per person, citing initial estimates.
Dominguez said the vaccine czar Carlito Galvez Jr. was looking at purchasing all three types of vaccines currently under development in the market, which would have different handling and logistics that the government needed to address.
Clouded by vaccine
Because of that, Chua said the Philippines may have to remain under quarantine next year and all restrictions would only be lifted in 2022 when a vaccine is already widely available.
Dominguez was confident of a rebound in the next two years, saying that the economy has retained its productive capacity and the labor force will continue to be young as compared to other countries.
The finance chief blamed the country’s current economic ills on consumers’ fear of catching the virus. About three-fourths of the Philippine economy was fueled by consumer spending before the pandemic.
But once the pandemic is over, the economy “will boom,” Dominguez said.
However, he said the Duterte administration will stick to its prudent spending tack to keep the budget deficit in control.
