Economic recovery seen in S2 after GDP shrinks 0.2% amid Covid-19

The country’s GDP accelerated by 5.7 percent in the first quarter of 2019, and by 6.7 percent in the fourth quarter last year. (File Photo: Dr. Karl Kendrick Chua /Facebook)

MANILA – The country’s chief economist remains optimistic about the recovery of the Philippine economy in the second half of 2020 after declining by 0.2 percent in January to March, its first contraction in two decades, mainly due to the impact of the coronavirus disease 2019 (Covid-19) pandemic.

Acting Socioeconomic Planning Secretary Karl Kendrick Chua said the country faced unexpected and “significant socio-economic risks and shocks” during the first quarter, among them the Taal volcano eruption in January, the decline in tourism and trade starting in February due to Covid-19, and the imposition of the enhanced community quarantine (ECQ) in Luzon and other parts of the country starting March to contain the spread of the virus.

“This is the first time real GDP (gross domestic product) growth fell into negative territory since 1998 during the combined El Niño and Asian financial crisis,” he said in an online press briefing Thursday. “Covid-19 has certainly posed serious challenges to the country’s strong growth and development prospects.”

The country’s GDP accelerated by 5.7 percent in the first quarter of 2019, and by 6.7 percent in the fourth quarter last year.

Chua, however, expressed hope that the country could start reversing the economic trajectory by June as it ramps up its Covid-19 testing capacity.

“So that by the second half of the year, we can fully recover. The idea here is that we use our policies and our collective effort to proactively shape our future into a recovery that looks more like a ‘V-shape’ so that by the end of the year, we will have a respectable economic performance,” he said.

The second-quarter economic performance “might be worse” with the full-month extension of the ECQ in April, Chua said, noting that the government, however, has been implementing policies to manage the growth trajectory.

A community quarantine has been imposed in Metro Manila starting March 15, and an ECQ for mainland Luzon from March 17 to April 12. The quarantine was further extended to May 15 amid rising Covid-19 cases.

“The good news is, as of May 1, many areas of the country have moved to GCQ (general community quarantine). So the main difference is, in the ECQ, the maximum number of people that can really work and the maximum value-added that the economy can operate is closer to 25 percent. Under the GCQ, it is closer to 75 percent. What this means is that there is a chance that we minimize the expected contraction in the second quarter. (But) I don’t think we can dream of achieving 6.5-percent (growth) by the end of the year,” he said.

Chua, who is also acting National Economic and Development Authority (NEDA) director general, said he was also banking on the continued implementation of the “Build, Build, Build” infrastructure program and strategies to stimulate domestic demand and boost this year’s economic performance.

“We have proven over the past few years that we can actually implement infrastructure projects at an accelerated pace and create millions of jobs while reducing the cost of logistics, especially for micro, small, and medium enterprises,” he said.

Stimulating the economy needs to begin with stimulating domestic demand or consumption, Chua said.

“Demand will only increase if people feel safe and are confident that (the) health care system is working for them. Stimulating domestic demand can begin with ensuring that agricultural production, food manufacturing, and the entire value-chain – including logistics from the farm to the table – are able to operate at the highest possible capacity within the parameters that will protect the health and well-being of both producers and consumers,” he added.

Chua further said the economic team and legislators would work out an economic recovery program in the coming weeks.

“(This) will gradually get people back to work, get businesses to normalize, and get our country back on track to achieve our pre-crisis growth and job potential,” he said.

Meanwhile, the Philippine Statistics Authority (PSA) reported on Thursday that the main contributors to the first-quarter economic growth decline were manufacturing, transportation and storage, and accommodation and food service activities.

Among the major economic sectors, agriculture, forestry and fishing; and industry contracted by 0.4 percent and 3 percent, respectively.

Services posted a growth of 1.4 percent during the period.