Sustaining economic recovery is new challenge

Published August 12, 2021, 12:02 AM

by Manila Bulletin

After five consecutive quarters of contraction that began in the first quarter of 2020, the Philippine economy posted a hefty positive growth of 11.8 percent on-year – signaling the onset of a recovery from the debilitating effects of a global pandemic.

The Secretary of Economic Planning noted that this was the outcome of the government’s management of the national health emergency that restored the economy’s ability to generate jobs and incomes.  He also cautioned that the momentum of the recovery might be slowed – even stalled – by the enforcement of enhanced community quarantine in the National Capital Region that accounts for a third of the economy.

Recall that last year, the economy plunged into deep recession: -0.7 percent contraction in the first quarter; a massive dip of 16.9 percent in the second quarter; further declines of 11.40 percent and 8.30 percent, respectively, during the third and fourth quarters of 2020; and -4.2 percent in the first quarter of 2021.

The country followed the rest of the world in enforcing lockdowns.   Severe mobility restrictions transformed commercial business districts into virtual ghost towns.  School campuses were closed.  Meantime, scientists and pharmaceutical firms worked feverishly to develop an antidote to a deadly novel coronavirus.

As shopping malls and restaurants were shuttered during the strictest lockdown phases, and only food and medicine purchases were allowed, domestic consumption – which was a major economic growth driver for 60 consecutive quarters – dropped by 15.3 percent and 9.2 percent in the second and third quarters last year.

Government spending became the main growth driver as private sector investments collapsed on the back of drastic declines in revenues and profits among large, medium and small businesses.  Large numbers of workers were also laid off.  Government was pressed to enact emergency legislation that included direct cash assistance to the most needy families.

The COVID contagion continues to spread as new, more highly infectious variants are being discovered.  In the midst of a lockdown, people are showing up in vaccination centers in large numbers – reflecting heightened awareness on the need to attain community protection.  There is renewed pressure on hospital facilities as the number of severely ill patients continues to rise. Hence, the general public has been urged to cooperate fully with the stringent quarantine measures.

Hopes for a sustained recovery for the rest of the year are pinned on a ramped up nationwide vaccination campaign – as well as on intensified prevention, testing and tracing programs.   More effective containment measures would enable the expansion of public construction activities and encourage increased capital expenditures by large companies.

The combined job creation programs launched recently by the government and the business sector could enable the attainment of higher disposable income that would, in turn, drive greater overall demand for goods and services.

It is important, too, that public morale – which was boosted significantly by the medal-winning efforts of our outstanding Olympians – would be further enhanced by the people’s confidence in the government’s ability to revitalize the economy.