PH economy drops 4.2% in Q1

The Philippine economy shrank at a slower pace in the first quarter of the year of 4.2 percent and is expected to stage a recovery in the next quarters despite the reimposition of stricter quarantine measures in Metro Manila and other provinces, according to a report by Philippine News Agency.

The Philippine Statistics Authority (PSA) on Tuesday reported that the country’s gross domestic product (GDP) posted a smaller contraction in the first three months of 2021 compared to an 8.3-percent decline in the fourth quarter of 2020 that resulted in the -9.5 percent growth rate last year.

“We saw quarter-on-quarter growth although it is not very high. These are improvements that will support our recovery towards our growth trajectory or target of 6.5-7.5 percent… Next quarter, I believe there is a strong reason to see even better or even positive growth,” Socioeconomic Planning Secretary Karl Kendrick Chua said in a virtual press briefing.

Chua said growths of exports and manufacturing have turned positive and created a net of 2.8 million jobs, indicating a direction of an improvement in the economy.

He is optimistic about economic recovery, citing the difference in the implementation of enhanced community quarantine (ECQ) and modified enhanced community quarantine (MECQ) in 2021 compared to last year.

Chua said 75 percent of the economy was shut down last year, there was no public transportation, and few sectors under Category 1 were allowed to operate.

“In this year’s ECQ, we allowed almost all (business establishments or activities) in Categories I, II, and III to operate subject to some capacity restrictions. We allowed public transport to operate subject to the 50-percent rule or one seat apart. We allowed workers to go out and be exempted from the curfew so these are some examples of why we think this year’s ECQ or MECQ impact on the first and second quarter are much more muted,” he added.

Chua said while they have seen some losses in the imposition of these quarantine measures, the country has still eight months to catch up and recover.

“While the past seven weeks of ECQ and MECQ in the NCR (National Capital Region) Plus will pose downside risk to growth, our actions in the next eight months can reverse these initial losses (from their imposition),” he said.

Chua, chief of the National Economic and Development Authority (NEDA), said this growth prospect is underpinned by three important policy actions which include safe reopening of the economy, full implementation of the recovery package, and acceleration of the vaccine program.

“Our projection for this year has assumed that the vaccine actually will begin to ramp up in the middle of the year so we are actually on track. We expect some 27 million doses to come from now until July,” he said.

Reading a prepared joint statement of the government’s economic managers, Chua said a total of 2.4 million vaccine doses have been administered to health care workers, senior citizens, and persons with comorbidities as of May 9 this year.

The country has also begun the inoculation of frontline workers in essential economic sectors, he added.

Chua said a recovery package supporting the safe reopening of the economy comprises the Bayanihan to Recover as One Act (Bayanihan 2), the 2020 budget, the 2021 budget, the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law that provides tax deductions to businesses of all sizes and targeted incentives to investors, the Financial Institutions’ Strategic Transfer (FIST) Act on addressing liquidity problems on firms, and the Government Financial Institutions’ Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE) bill on addressing solvency problems on firms.

“And we will be reviewing this first-quarter performance to assess the trajectory of growth in the rest of the year,” Chua said, adding the economy needs to post growth higher than 7.5 percent in the next three quarters to offset the first-quarter negative number and reach this year’s growth target.

Meanwhile, the NEDA chief said both industry and services showed smaller contractions in the first quarter of 2021, reflecting the recovery, while the decline in agriculture reflects the ongoing crisis in the hog industry.

Industry and services continued their gradual recovery, improving from -10.6 percent to -4.7 percent and from -8.0 percent to -4.4 percent, respectively.

“...The livestock industry saw a 23.2-percent drop as the African swine fever continues to hit the hog industry hard. To address this, the government has been decisive in lowering the tariff rates and increasing the minimum access volume for pork as a temporary measure to address the supply deficit and bring down the soaring prices of pork,” he said.

On the expenditure side, Chua said growth was driven by consumption in government, which increased by 16.1 percent.

Public construction also significantly improved by 26.2 percent in the first quarter of 2021 after two consecutive quarterly contractions of -27.1 percent in the third quarter of 2020 and -17.7 percent in the fourth quarter of 2020, he said.

“The recovery of infrastructure spending reflects the sector’s strong job recovery with a total of 940,000 jobs restored between pre-Covid-19 period and March of 2021. As the economy rebounds in the coming months, we expect business confidence to return, thereby giving private construction further impetus to recover,” he added.