Duterte economic team sees recovery starting in second quarter

MANILA, Philippines—President Rodrigo Duterte’s economic team on Tuesday (June 15) expressed confidence that the economy will rebound starting the second quarter with mass vaccination in full swing and government spending, especially on infrastructure, remaining strong.

During the Economic Journalists’ Association of the Philippines’ (EJAP) midyear forum, Finance Secretary Carlos Dominguez III said “we might appear to be behind our neighbors for now, but our recovery will be stronger because of our sound fundamentals.”

“After over a year of battling the pandemic, the Philippines continues to maintain its financial balance,” Dominguez said.

“Due to the successive tax and structural reforms done since 2016, our fiscal fundamentals remained solid. We did not suffer the kind of fiscal downturn that typically accompanies an economic crisis,” Dominguez added.

“When the crisis hit us, much of the spadework was done. We really did not have to go back to the drawing board in order to plan for the country’s economic recovery,” the finance chief said, citing the recent passage of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) and Financial Institutions Strategic Transfer (FIST) laws.

“Presently, our vaccination program has been rolling out quite well. This gives us hope that we can now fully reopen our economy,” he said.

The Philippines slid to its worst post-war recession in 2020 amid the longest ongoing and most stringent COVID-19 lockdown in the region.

Socioeconomic Planning Secretary Karl Kendrick Chua told the EJAP forum that the prolonged quarantine restrictions were just “artificial reasons” for gross domestic product (GDP) decline year-on-year for five straight quarters.

But if risks were to be balanced with the gradual reopening of the economy, GDP would be back on the growth path starting the second quarter, said Chua, who heads the state planning agency National Economic and Development Authority (Neda).

The think tank Japan Center for Economic Research (JCER) on Tuesday projected the Philippines’ second-quarter GDP to jump 13.8 percent year-on-year due to the low base from last year’s enhanced community quarantine (ECQ), which froze 75 percent of the economy.

JCER also forecast GDP to grow 7.2 percent year-on-year during the third quarter, and then expand although by a slower 4.4 percent in the fourth quarter.

On a quarter-on-quarter basis, JCER expected second-quarter GDP to be 1-percent higher than the first-quarter output. GDP would further grow by 1.9 percent and 1.1 percent quarter-on-quarter during the third and fourth quarters, JCER said.

However, JCER slashed its 2021 GDP growth forecast for the Philippines to 5.1 percent from 6.6 percent previously. Its updated full-year projection was below the government’s downscaled 6 to 7 percent target.

“The main difference between last year’s quarantine and this year is that we did not shut down 75 percent of the economy,” Chua said.

“In fact, we allowed public transport to operate even during this year’s ECQ [in National Capital Region (NCR) Plus],” he said.

“Despite the ECQ or modified ECQ in the last three months, more people are going to work,” Chua said.

“In terms of mobility, we are just 25-percent down from the normal period, compared to last year when we were around 50 to 80 percent down. This shows the kind of recovery that we are expecting in the second quarter,” Chua added.

NCR Plus—Metro Manila and its four surrounding provinces which accounted for half of the economy—reverted to stricter lockdowns before March until middle of May in response to a new surge in COVID-19 cases partly driven by more contagious virus variants.

For Chua, the P2-trillion recovery program, which included nationwide mass inoculation and infrastructure build-up, needed to be implemented “as soon as we can.”

Chua said the over P1-trillion each programmed to be spent on infrastructure this year and in 2022 showed that implementation of big-ticket as well as small-scale projects was “on track.”

Budget Secretary Wendel Avisado told the EJAP forum that the national government’s spending as of end-April, which rose 3.3 percent year-on-year to P1.35 trillion, was primarily boosted by “higher disbursements for infrastructure and equity.”

Avisado said only P893 billion, or 19.8 percent, of the P4.51 trillion 2021 national budget has yet to be obligated by government agencies for 2021.

“Government spending is also expected to accelerate further given the recent release of allotments amounting to P124.3 billion for the month of May,” Avisado said.

TSB