PH economy sinks deeper into recession
The Philippine economy is now in its longest recession since the foreign debt crisis in the 1980s after it shrank further in the first three months of 2021.
The pandemic-induced economic downturn has extended to five consecutive quarters as the Philippines remained under the longest and most stringent COVID-19 quarantine in Asia due to elevated virus infections.
National Statistician Dennis Mapa told a press briefing Tuesday that first-quarter gross domestic product (GDP) declined by 4.2 percent from a year ago, better than the 8.3-percent drop in the fourth quarter of 2020 but worse compared to the 0.7-percent contraction during the first quarter of 2020. GDP is the total value of all goods and services produced within the country for a given period.
The decline reflected the economic hardship of consumers, whose combined spending fell by 4.8 percent in the first quarter. Such household consumption accounted for about three-fourths of GDP. The lockdowns caused by the pandemic led many small enterprises to close shop and reduced revenues of bigger companies, forcing them to lay off workers. With less money, these unemployed workers’ families spent only on essential needs such as food. The resulting lower demand for other goods and services prompted more companies to cut production and consequently suffer losses. They bring down operating costs further by laying off more workers. This is what economists refer to as the vicious cycle of an economic downturn.
The recession started in the first quarter of 2020 when GDP shrank as a result of the eruption of Taal Volcano, which disrupted production at nearby industrial zones. The stringent quarantine restrictions imposed since mid-March of last year exacerbated the situation and led the economy to continue shrinking until the first quarter of this year.
Millions of jobs had been shed and thousands of businesses shuttered as a result of the pandemic and its ensuing quarantines.
Palace still hopeful
Malacanang said it was saddened by the continued shrinking of the Philippine economy, but was looking forward to GDP growth in the succeeding quarters of the year.
Presidential spokesperson Harry Roque said that while GDP was not yet showing positive growth, it was improving.
“Don’t worry, through our health measures, vaccination, we expect that our GDP would be positive in the succeeding quarters,” he said, appealing to the public to continue complying with health protocols to pave the way for the reopening of the economy.
The previous prolonged recession was from the fourth quarter of 1983 up to the fourth quarter of 1985, or nine consecutive quarters, before then President Ferdinand Marcos was ousted by the peaceful Edsa revolution in 1986, according to Mapa.
Philippine Statistics Authority (PSA) data showed that GDP slid to P4.35 trillion during the January-to-March period from P4.45 trillion a year ago. All three of the economy’s major production sectors contracted in the first quarter — agriculture by 1.2 percent; industry by 4.7 percent, and services by 4.4 percent.
On the other hand, government spending increased by 16.1 percent mainly on the back of massive infrastructure projects, which lifted public construction by 26.2 percent.
Given minimal lifting of restrictions at the start of the year, Mapa said first-quarter output grew by only 0.3 percent compared to GDP in the fourth quarter of last year — the slowest quarter-on-quarter growth since the strictest lockdown in the second quarter of 2020 was gradually eased.
Private-sector economists said that with the National Capital Region (NCR) Plus — the collective term for Metro Manila and the provinces of Bulacan, Cavite, Laguna and Rizal that accounted for half of the country’s economy — under more stringent quarantine measures since early April due to a surge in COVID-19 cases, second-quarter GDP would again contract compared to the first-quarter output.
However, the country’s chief economist, Socioeconomic Planning Secretary Karl Kendrick Chua, was still optimistic that the 2021 GDP growth target of 6.5-7.5 percent could still be achieved to jump-start a rebound from last year’s 9.6-percent GDP decline– the Philippines’ worst post-war record.
Chua, who heads the state planning agency National Economic and Development Authority (Neda), said the economy had at least eight more months to catch up.
He said a further easing of quarantine restrictions combined with a safe reopening of the economy as well as faster mass vaccination and better contact-tracing would help in economic recovery moving forward.
Chua added that unlike last year’s enhanced community quarantine (ECQ) when 75 percent of the economy stopped, the recent two-week ECQ reimposed in NCR Plus and the ongoing modified enhanced community quarantine (MECQ) allowed people to go to work and minimized disruption to livelihoods.
He projected the impact of the ECQ and MECQ in NCR Plus on second-quarter economic performance to be muted. “Once the present spike is over, we can implement quarantine relaxations in a phased approach to boost our recovery this year. For instance, we can move the NCR toward MGCQ [a less-stringent modified general community quarantine], allow families and children to participate in the economy and restart face-to-face schooling,” Chua said.
With a report from Leila B. Salaverria
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