PH economy shrinks after two decades of sustained growth

Published May 7, 2020, 12:00 AM

by manilabulletin_admin

By Chino Leyco and Genalyn Kabiling

The Philippines ended its over two decades of sustained economic expansion as the coronavirus pandemic created serious challenges to the nation’s strong growth and development prospects.

Following a series of negative events early this year, Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua said the local economy contracted by 0.2 percent in the first quarter, its first negative growth since 1998.

The January to March unfavorable economic performance was a reversal of the 5.7 percent growth registered in the same period last year.

“Our country has faced significant socio-economic risks and shocks during the first quarter of 2020, all totally unexpected,” Chua said in a statement.

Among the economic drags cited by Chua include the Taal Volcano eruption in January, the significant decline in tourism and trade due to pandemic beginning February as well as the implementation of the enhanced community quarantine (ECQ) starting mid-March.

“Containing the spread of the virus and saving hundreds of thousands of lives through the imposition of the ECQ has come at great cost to the Philippine economy. Our economic growth is showing weaker performance compared to the past two decades,” Chua said.

On the demand side, household consumption significantly slowed down by 0.2 percent as almost all items posted weaker growth. An exception was household spending on health, which grew by 11.5 percent, faster than the 6.9 percent in the previous quarter.

On the supply side, all major sectors of the economy also posted weaker growth as only those that provide essential goods and services were allowed to operate during the ECQ.

Growth in the services sector significantly moderated to 1.4 percent, while industries declined by 3.0 percent, with the drop in manufacturing and construction and the sustained decline in mining and quarrying.

The agriculture, fishery, and forestry sector also contracted by 0.4 percent primarily on account of lower production of palay and fishing and aquaculture.

Finance Secretary Carlos G. Dominguez III, meanwhile, said the negative growth was the inevitable result as the coronavirus disease wreaks havoc on economies worldwide.

Dominguez said he expects the contraction will further deepen in the second quarter as the economy came to a standstill during the twomonth ECQ over Metro Manila, other cities and provinces.

“The outbreak of this lethal virus, which subsequently froze economies and shuttered businesses in the four corners of the world,” Dominguez said.

Despite these challenges, Chua assured the Philippines is still well positioned to recover strongly owing to its solid macroeconomic and fiscal management.

V-shaped economic recovery

After the country’s gross domestic product (GDP) decreased by 0.2 percent from January to March this year, Presidential spokesman Harry Roque admitted that the government expects the economy to “shrink” further in the second quarter amid the coronavirus-related quarantine restrictions.

“We expect, of course, the economy to shrink even more in the month of April because the whole month of April was basically under ECQ and the first two weeks of May as well. We definitely expect a big contraction,” he said during a virtual press conference Thursday.

Roque, however, remained optimistic that the domestic economy will rebound due to the anticipated increase in infrastructure spending.

“The economy planners are vigilant. We foresee a V-shaped economic recovery,” he said.

“There will be a steep decline in the GDP for the second quarter perhaps, but we expect a strong rebound courtesy of the ‘Build, Build, Build’ program of the government and the very prudent fiscal policy as well as prudent monetary policy which means we are using public spending as a tool of economic recovery,” he added.

“Of course we regret it but we’re glad that it’s a minimal contraction given that nag-ECQ na tayo ng last two week of March which is part of the 1st quarter,” Roque said about the latest economic figure.

“The good news for the Philippines (is that) we have sound economic fundamentals as evidenced by a very good (global credit) rating and a very strong peso. That is why despite the fact (that) we already imposed ECQ in the month of March, (or in the second) half of March, the economy contracted only by .2 percent,” he said.