The country’s gross domestic product (GDP) likely grew by more than 10 percent year-on-year in the second quarter largely due to the low base last year but also because of the better management of risks during the recent surge in COVID-19 cases, the country’s chief economist said.
Socioeconomic Planning Secretary Karl Kendrick Chua told the Inquirer that based on the latest preliminary economic data, a double-digit or above 10-percent GDP growth was “doable” in the second quarter. The government is scheduled to release the GDP report on Aug. 10.
Chua said he was “hopeful” for a better outturn—a revert to year-on-year growth in output which was last seen in the fourth quarter of 2019.
The pandemic-induced recession had extended up to the first quarter of 2021, when the GDP shrank by 4.2 percent year-on-year.
The five straight quarters of year-on-year decline was expected to end in the second quarter partly due to base effects as GDP slid by a record 16.9 percent a year ago at the height of the enhanced community quarantine (ECQ), which put 75 percent of the economy to a halt from mid-March to May 2020. For the second half of the year, “prospects are good if we do three things: manage risks and open the economy, implement the entire recovery program, and vaccinate more and more,” said Chua, who also heads the National Economic and Development Authority. 6-7% growth in 2021
The government targets a 6- to 7-percent GDP growth this year following last year’s worst post-war recession when output contracted by 9.6 percent.
Last week, Chua noted that despite the revert to ECQ and modified ECQ in National Capital Region Plus—Metro Manila and four neighboring provinces which accounted for half of GDP—before March ended up to mid-May, the government “[did] not make the mistake of locking down a big part of the economy.”
In separate emails, Oxford Economics assistant economist Makoto Tsuchiya said he projected the Philippine GDP to have grown by 12.7 percent year-on-year in the second quarter, while Institute of International Finance (IIF) associate economist Yuanliu Hu’s forecast was 13.4 percent.
“We have upgraded our year-on-year growth forecast in the second quarter (from 12 percent previously), because data, including manufacturing production, suggest the economy held up better than expected despite a two-week partial lockdown from late March,” Tsuchiya told the Inquirer.
“Manufacturing output growth year-on-year turned positive in April for the first time since February 2020. Positively, the improvement in sequential growth in April was also broad based,” he said.
The May manufacturing PMI (purchasing managers’ index) survey showed a sharp rise in new export orders, which should bode well for the manufacturing sector and goods exports in the coming months, Tsuchiya said. “We expect the recovery in manufacturing activity will continue to outpace that of the services sector as social distancing measures have disproportionately hit social spending.” But “while we do look for momentum to improve in the second half as restrictions are gradually eased, we remain cautious about the speed of recovery in household spending,” Tsuchiya added, noting that “unemployment remains elevated and the announced cash handouts, as part of the third fiscal package, will only partly offset the negative impact of higher prices on real disposable income.”
As such, Tsuchiya’s full-year GDP growth forecast for 2021 was only 4.8 percent, below the government’s target range.
For his part, Hu said the IIF expected GDP to grow by 5.5 percent for the entire 2021. “The condition in the second half of this year should improve, with the vaccination program speedup,” he said. INQ