PH economy shrinks 4.2% in Q1

Published May 11, 2021, 10:08 AM

by Chino S. Leyco

The country’s economy shrank in the first three-months of the year, marking its fifth straight quarter of recession, due to prolonged pandemic, data the Philippine Statistics Authority (PSA) showed.

While the pace of the fall eased from the previous quarter, the Philippines remained the weakest among its Asian peers in terms of recovery from the coronavirus crisis.

The annual economic output, as measured by the Philippines’ gross domestic product (GDP), contracted by 4.2 percent in January to March, worse than the minus 0.7 percent registered a year earlier, but better compared with minus 8.3 percent in the final three-months of 2020.

The country’s latest GDP figure emerged as a laggard in Asia so far. Indonesia’s economy fell 0.7 percent, while Vietnam and Singapore grew by 4.5 percent and 0.2 percent, respectively. China posted the fastest growth with 18.3 percent.

Economists expect Malaysia and Thailand to contract by 2.6 percent and 3.5 percent, respectively. 

Based on the PSA data released on Tuesday, May 11, all major sectors of the economy, except government expenditures, contracted in the first-quarter.

Household consumption, a major economic contributor accounting for more than 70 percent of GDP, failed to gain momentum as it marked the fourth straight negative growth rate of minus 4.8 percent.

On the other hand, public spending increased at its fastest pace in three-quarters, expanding by 16.1 percent.

Nicholas Antonio T. Mapa, ING Bank Manila senior economist said household spending slipped as incomes remain depressed amid an elevated unemployment rate. The government estimated that there were 3.44 million jobless Filipinos as of March. 

Mapa, on the other hand, said government expenditures jumped as the Duterte administration deployed the second round of stimulus to help support the recovery.

Despite the disappointing end-March GDP, the economy still grew on a seasonally adjusted quarter-on-quarter basis at 0.3 percent.

“The country’s strong economic position before the pandemic and improving economic data in recent months point to an economy that is on the mend,” Socioeconomic Planning Secretary Karl Kendrick T. Chua said.

“Our economy may slow down in early 2021 given recent developments, but we will not backpedal,” he added.

Chua said the economy will likely rebound in the second-quarter due to less restrictive quarantine controls.

The country recorded its deepest GDP contraction in April to June 2020 at minus 16.9 percent amid the strictest lockdowns across the country due to the COVID-19 pandemic. While GDP may still reverse its losses incurred in the first quarter, Chua said the economy should expand by more than seven percent in the remaining months to attain the government’s full-year goal of 6.5 percent to 7.5 percent.

But for Moody’s Analytics, the growth outlook for the Philippines remains relatively downbeat owing to partial lockdown measures in April.

Eric Chiang, Moody’s Analytics associate economist said the recent lockdowns are expected to shave off momentum from the economic recovery and weigh on the services sector, particularly on personal services, which were not allowed to operate due to social distancing rules.