Palace expects ‘V-shaped’ economic recovery

FILE: The Makati CBD skyline bordered by Ayala Avenue, Manila Philippines. (Photo: DerekBBB/Flickr, CC BY-NC 2.0)

MANILA – Malacañang on Thursday said it expects a “V-shaped” economic recovery in the third quarter of the year as the country continues to grapple with the impact of the coronavirus disease 2019 (Covid-19) pandemic.

Presidential Spokesperson Harry Roque made this remark after the Philippine Statistics Authority (PSA) announced that for the first time since 1998, the country’s gross domestic product (GDP) decreased by 0.2 percent in January to March this year.

Roque described the decline as a “minimal contraction”, saying the enhanced community quarantine (ECQ) placed over Luzon and some parts of Visayas and Mindanao was expected to take a toll on economic activity.

“Of course, we regret it but we’re glad that it’s a minimal contraction given that nag ECQ na po tayo ng (we already went on ECQ during the) last two weeks ng March which is part of the first quarter,” he said in a virtual presser.

He is optimistic that the country would be able to make a rebound given the efforts exerted by the government and “sound economic fundamentals” as evidenced by a high credit rating and strong peso despite the ECQ.

“We expect of course the economy to shrink even more during the month of April because the whole month of April was basically under ECQ and the first two weeks of May as well. We definitely expect a big contraction but the economic planners are very vigilant.

We foresee a V-shape of economic recovery,” Roque said.

A V-shaped economic recovery refers to a sharp economic decline followed by a quick and sustained recovery.

He also acknowledged that the second quarter will be worse because of the ECQ extension in April but remained hopeful that the economy will benefit from “Build, Build, Build” program and “very prudent” fiscal policy.

“There will be a steep decline in GDP for the second quarter perhaps but we expect a very strong rebound courtesy of the Build, Build, Build program of the government and very prudent fiscal policy as well as prudent monetary policy which means we’re using public spending as a tool for recovery and we’re also using money supply as a tool also for economic recovery,” he added.

Asked about the possibility of the country facing a recession, Roque expressed hope that the country’s GDP would not reach that point.

“Ang (A) recession po kasi (is) three consecutive quarters of decline in the GDP. We’re hoping po that pursuant to the V-strategy baka naman umakyat na (it might rise) by the time we hit the third quarter,” he said.

In a separate virtual presser, NEDA acting Secretary Karl Chua said increasing the country’s Covid-19 testing capacity to 30,000 tests per day could reverse the economic trajectory by June so that by the second half of the year, the country can recover.

He said areas which have moved to general community quarantine (GCQ) could also help minimize the expected contraction in the second quarter, he said.

Since March 17, Metro Manila and other “high-risk” areas have been under ECQ which is expected to end on May 15.

The GCQ, with relaxed quarantine measures, is currently being implemented in all low-risk and moderate-risk areas nationwide since May 1.