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PH posts worst recession in 2020

By: - Reporter / @bendeveraINQ
/ 10:36 AM January 28, 2021

MANILA, Philippines—The Philippine economy fell to its worst post-war recession in 2020 amid the COVID-19 pandemic, aggravated by the onslaught of natural disasters, like Taal Volcano’s eruption and a string of strong typhoons, that devastated both lives and livelihoods.

National Statistician Claire Dennis Mapa on Thursday (Jan. 28) said the 9.5-percent drop in gross domestic product (GDP) in 2020 was the biggest since the government started recording yearly output in 1946 or after the Second World War.

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Mapa told the Inquirer that the value of goods and services produced in the Philippines in 2020 amounted to P17.98 trillion at current prices.

Before the pandemic, the country churned out P19.52 trillion in output in 2019—sustaining annual economic growth for 21 straight years since GDP declined by 0.5 percent in 1998 because of the Asian financial crisis.

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Prior to 2020, the worst recession was in 1984, when the economy shrank by 7 percent during the waning years of the Marcos dictatorship saddled with a debt crisis.

But the pandemic’s larger damage had been inflicted on the Philippines’ gross national income (GNI)—the total output produced by Filipinos here and abroad.

Mapa said GNI slid by a faster 11.1 percent in 2020—he told the Inquirer that the reduction in deployment of overseas Filipino workers (OFWs) when global borders were closed or restricted to contain the deadly coronavirus led to a decline in Filipinos’ total compensation income.

When divided across the Philippines’ estimated population of 109.1 million as of end-2020, Mapa said the share per capita or for every Filipino of GDP declined 10.7 percent, while per capita GNI dropped by a bigger 12.3 percent, reversing steady growth in recent years.

The Philippines seeks to move up to upper middle-income country status next year when President Rodrigo Duterte steps down from office, but the reduction in GNI may make it more difficult to achieve the feat.

In 2020, the World Bank redefined the threshold for upper-middle income countries to a GNI per capita ranging between $4,046 and $12,535, up from the previous range of $3,996 to $12,375.

As the Philippines’ growth slowed in 2019 due to the then delayed national budget approval, it remained a lower middle-income country with a GNI per capita of $3,850 in 2019—and given the double-digit decline in per capita GNI in 2020, the ascent to upper-middle income status instead took a step back.

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Despite these setbacks, acting Socioeconomic Planning Secretary Karl Kendrick Chua on Thursday claimed the Philippines was on track to move up to upper-middle income status in 2022, to join the likes of China, Indonesia, Malaysia and Thailand in the region.

Chua, who heads the state planning agency National Economic and Development Authority (Neda), also claimed the poverty-reduction target may be achieved “earlier than 2022, despite the pandemic.”

The Duterte administration sought to slash the poverty rate to 14 percent next year and made inroads pre-pandemic—nationwide poverty incidence fell to 16.7 percent in 2018 from 23.3 percent in 2015. The next poverty survey will be conducted soon, alongside a monthly reporting of the employment situation which Chua said would allow better monitoring of the labor market after 4.5 million Filipinos were made jobless by the pandemic and its ensuing lockdown in 2020.

But Chua himself had flagged a possible temporary increase in urban poverty due to the pandemic, which he had said could bring the 2020 rate to 16-17.5 percent.

Chua’s push to gradually reopen the economy while adhering to minimum health and safety standards was nonetheless already recovering some lost ground—fourth-quarter GDP contraction narrowed to 8.3 percent year-on-year from 11.4 percent in the third quarter.

On a quarterly basis, GDP grew by 5.6 percent in the fourth quarter of 2020 from the third-quarter output, while GNI increased by 2.9 percent.

These quarterly improvements, however, were slower than the 8-percent GDP growth and 6.3-percent GNI expansion during the third quarter from the trough in the second quarter—at the height of the longest and most stringent COVID-19 lockdown in the region.

With consumers being urged to spend more and businesses enjoined to resume their operations, the industry sector grew 11.6 percent quarter-on-quarter from October to December, while services expanded by 4.5 percent.

Only the agriculture sector contracted by 4.1 percent in the fourth quarter compared to the preceding quarter as typhoons damaged farm output.

But for the entire 2020, output decreased across all three major economic sectors—industry shrank by 13.1 percent, services by 9.1 percent, and agriculture by 0.2 percent.

Chua said a “careful balance” of gradually opening the economy, avoiding prolonged quarantines, and adhering to health standards would hopefully pave the way for economic recovery in 2021 through restoration of business and consumer confidence.

However, jump-starting consumer spending may not be easy—surveys conducted by the World Bank in August 2020 showed that one of every four breadwinners was jobless; one in every three families suffered from hunger; and one out of three families had no access to a doctor despite threats from a deadly coronavirus.

According to the World Bank, the rich had been able to “use their savings and borrowed from banks” to cope with the harder times, while poor Filipinos had to scrimp on food expenses while also borrowing money from friends.

While cash grants and relief goods from the government helped—up 90 percent of the poorest and most vulnerable households supposedly benefited from dole outs, the pandemic’s wider impact on the global economy trickled down to 60 percent of remittance recipients who got none or less than pre-COVID-19 inflows in 2020, the World Bank said.

In the case of businesses, a World Bank survey in July 2020 showed that sales fell by 60 percent or more; firms engaged in construction, education and food had to lay off about half of their workforce; and three out of every 20 companies had to shut down for good.

As such, businesses had sought support from the government to pay their workers as well as to access low-interest loans, as almost half of them had no idea when they could reopen their doors, according to the World Bank.

JE/TSB

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TAGS: 2020, COVID-19, economy, pandemic, Recession
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