Government economic managers remain hopeful about full economic recovery from the impact of the COVID-19 pandemic, after the gross domestic product grew 11.8 percent year-on-year in the second quarter, the fastest in more than three decades.
The second-quarter expansion ended five quarters of technical recession since the first quarter of 2020 at the onset of the global health crisis.
Economic Planning Secretary Karl Kendrick Chua expressed confidence the growth momentum could be regained especially with the faster pace of vaccination rollout that would bolster consumer and business confidence in the months ahead.
Chua said prospects for a strong economic recovery in 2021 remained promising. “Although there are speed bumps, given the current enhanced community quarantine in Metro Manila and other parts of the country, we are now better equipped to sustain continuous positive growth,” Chua told reporters during the online second-quarter GDP briefing.
Chua was referring to the two-week enhanced community quarantine in Metro Manila and adjacent provinces imposed by the government from Aug. 6 to 20 to curb the further spread of the more transmissible Delta variant of the virus.
The National Economic and Development Authority earlier said that every week of ECQ in the National Capital Region and adjacent provinces would cost the economy around P150 billion. The quarantine status was downgraded to MECQ after Aug. 20.
Latest reports show that the hospital occupancy rates in Metro Manila and adjacent provinces are rising. The Department of Health is not downplaying the possibility of a longer period of lockdowns to provide hospitals breathing space from the influx of infected patients.
The International Monetary Fund said the latest quarantine restrictions in Metro Manila and other provinces would be “downside risks” to economic growth. IMF resident representative to the Philippines Yongzheng Yang said in an online briefing the IMF team was closely monitoring the developments.
The OCTA Research Group said that as of Aug. 15, 2021, the country’s coronavirus reproduction number, which refers to the number of people that each COVID-19 case can infect, rose to 1.46. To put the situation under control, the reproduction rate should be below 1.0.
The country’s average daily attack rate, the number of new daily cases per 100,000 population, reached 10.23 which was considered “high.” The ICU utilization rate of 70 percent as of Aug. 13 was also in the “high” category.
Meanwhile, about 12,282,006 or 17.19 percent of the country’s eligible target population were fully vaccinated as of Aug. 12, according to the National Task Force Against COVID-19. The government aims to inoculate around 70 percent of the country’s population by yearend.
In a statement, the task force said 26,677,269 doses of COVID-19 vaccines were administered in the country including over 14 million first-shot doses.
Revised forecast
The interagency Development Budget Coordination Committee recently revised the 2021 GDP growth forecast by two percentage points, from the previous range of 6 percent to 7 percent to a band of 4 percent to 5 percent.
It said the revision was “in light of the re-imposition of stricter mobility restrictions in various areas of the country to effectively address the heightened risks brought about by the COVID-19 Delta variant.”
The DBCC said its careful balancing of COVID-19 and non-COVID-19 risks in the first half allowed the country to improve GDP growth to 11.8 percent in the second quarter, a sharp reversal of the 3.9-percent contraction in the first quarter and 17-percent decline a year ago.
“Without the present spike, the original growth target of 6.0 to 7.0 percent would have been achievable. However, with the global emergence of the Delta variant, the second-half growth outlook was revised downwards to reflect the additional restrictions imposed by the government, which are necessary to curb its spread,” the economic team said.
It said the strategy is to continue managing the risks carefully by imposing granular quarantines, while allowing a vast number of people to earn a living.
“We will continue to use this period to accelerate the roll-out of the vaccination program,” said the committee, which includes the Department of Finance, the Department of Budget and Management and the National Economic and Development Authority.
“The Duterte administration remains steadfast in its commitment to save lives, protect communities, and preserve the livelihood of Filipinos amid this pandemic. With everyone’s cooperation, we will recover strongly and regain the pre-pandemic growth momentum towards a better life for every Filipino,” Chua said.
National Statistician Dennis Mapa said the main contributors to the second-quarter growth were manufacturing, which rebounded 22.3 percent; construction, 25.7 percent; and wholesale and retail trade; repair of motor vehicles and motorcycles, 5.4 percent.
Among the major economic sectors, industry and services posted growths of 20.8 percent and 9.6 percent, respectively. Agriculture, forestry, and fishing posted a contraction of -0.1 percent in the second quarter of 2021.
On the demand side, household final consumption expenditure improved by 7.2 percent, along with the following items: gross capital formation, 75.5 percent; exports, 27.0 percent; and imports, 37.8 percent.
The government final consumption expenditure dropped 4.9 percent in the second quarter of 2021 on high base effect. Public spending peaked in the second quarter of 2020 when the government disbursed record cash subsidies to families affected by the ECQ.
Economic losses
As almost all sectors of the economy bounced back in the second quarter despite the imposition of the ECQ and the MECQ in April and May 2021, Chua said this was a clear indication that managing risks, instead of shutting down large segments of the economy, stands a far better chance of improving both economic and health outcomes.
Economic managers said unlike last year’s ECQ where around 75 percent of the economy were shut down, the country had much more latitude this year. Most industries and services continued to operate, public transportation also remained available and workers were exempted from the curfew. These are supported by mobility data, which shows that visits to public transport stations and workplaces strongly improved compared to last year.
“The increase in economic activity has led to more Filipinos regaining their jobs and income. The recent labor force survey results for June 2021 showed that the economy generated an additional 2.5 million jobs compared to the pre-pandemic level, and the quality of employment has improved given the much lower underemployment rate,” they said.
