The Philippine economy contracted for three straight quarters as consumer spending and business activity remained depressed owing to stringent quarantines imposed on key economic hubs to contain the spread of the coronavirus infections.

The local economy, as measured by the country’s gross domestic product (GDP), slipped by 11.5 percent in July to September this year, a reversal of the 6.3 percent growth in the same period last year, but softer than the record 16.9 percent contraction in the second-quarter. 

Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua said the reimposition of stricter community quarantine in Metro Manila as adjacent provinces and Cebu City in the third-quarter took a heavier toll on the economy.

“The double-digit contraction in the third quarter is not surprising given the return of more stringent quarantine measures in NCR and neighboring provinces, and Cebu City, which together account for around 60 percent of the Philippine economy,” Chua said.

Metro Manila, adjacent provinces, and Cebu City account for around 60 percent of the Philippine economy.

He also said restrictions in public transportation had dragged down the economy as it prevented many workers from leaving their homes and reporting for work even if their industries are allowed to operate.

The third-quarter GDP brought the country’s January to September average to 9.7 percent contraction, well above the government’s target of minus 4.5 percent to minus 6.6 percent.

The economy needs to grow 6.6 percent in the final three-months of the year to hit an average of 5.5 percent contraction for 2020, which National Statistician Claire Dennis S. Mapa admitted is no longer feasible.

Despite the double-digit decline, Chua said that “the economic team is optimistic that the worst is over for the country,” noting the country can return to a solid growth and development trajectory if it enables the economy to recover by efficiently managing risks.

“Our experience with COVID-19 over the past several months tells us two things. First, the economy is strong enough to recover, if we enable it to do so. Second, our best recourse to help the economy is to manage risks,” Chua said.

“Managing risks, instead of totally avoiding them, will allow us to safely open more of the economy and help Filipinos recover their sources of income. This will also put the Philippines back on its solid growth and development trajectory,” he added.

“The smaller GDP contraction of 11.5 percent in the third quarter from a contraction of 16.9 percent in the second quarter indicates that the Philippine economy is on the mend. The path is clearer to a strong bounce-back in 2021,” he added.

The economy has begun to recover, Chua said, citing that on a quarteron-quarter basis, the GDP grew by 8 percent in the third quarter, reflecting the return of economic activities as the quarantine was eased.

On the expenditure side, smaller contractions were recorded in household consumption, firm investment, exports, and imports, which Chua said signaled that households and firms are recovering.

In particular, goods exports grew by positive 2.2 percent in September, as the economy of the country’s major trading partners in the region bounced back, the official said.

On the supply side, agriculture growth slowed to 1.2 percent, as the sector faced a number of plant and animal diseases.

These headwinds, however, had minimal effects on overall food supply as evidenced by falling food inflation in the same period.

Both industry and services also showed a smaller contraction, consistent with the initial recovery of employment, where some 7.5 million workers returned in the third quarter.

This reduced the unemployment rate to 10 percent in July from 17.7 percent in April, when the quarantine was at its strictest.

Earlier, the government approved measures to further open up the economy in the fourth quarter, subject to enforcing the minimum health standards and enhancing the Prevent, Detect, Isolate, Treat, Reintegrate strategy.

The Department of Trade and Industry (DTI) and the Department of Transportation (DOTR), respectively, have also issued guidelines to allow more sectors to expand capacity to between 75 and 100 percent and to increase public transport capacity.

Amid efforts to avoid virus surges while easing restrictions on businesses and transportation, Chua also expressed that the economic team is hopeful that Congress will do its part to help the economy bounce back faster by passing the pending recovery bills within the year.

These are the 2021 General Appropriations Act (GAA), the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, the Government Financial Institutions Unified Initiative to Distressed Enterprises for Economic Recovery (GUIDE) Act, and the Financial Institutions Strategic Transfer (FIST) Act.

Chua also added that in the fourth quarter, the full release and utilization of Bayanihan 2 is crucial to improving 2020 GDP prospects, while the 2021 General Appropriations Act will provide the country with some of the heftiest tools necessary to rebuild the economy.

“The timely passage of the 2021 budget is crucial in helping attain the 6.5 to 7.5 percent growth target for next year,” he said.