"A great deal depends on what happens between July and September."
"A great deal depends on what happens between July and September."
Toward the end of every year the nation’s economic planning agency, NEDA (National Economic and Development Authority) assesses the performance of the Philippine economy in the ending year and the likely economic environment in the approaching year. It then proceeds to make a projection of the economy’s growth in the coming 12-month period. The projection is not set in stone and the economic planners adjust the figure if necessitated by the economy’s quarter-by-quarter performance.
The annual GDP (gross domestic product) growth indicated in the Philippine Development Plan 2017-2022 is 7 to 8 percent. In the face of adverse changes in the world economic environment and the Philippine economic environment and the Philippine economy’s disappointing 2019 performance (5.9 percent growth), however, NEDA downscaled its 2020 growth projection to 6.5-7.5 percent.
At the time that it reiterated its 2020 growth projection, the Philippine economy was enjoying a robust 2019 fourth quarter and things pointed to a growth rebound in 2020. The economy appeared to be headed to a return to the 6-percent-plus annual GDP growth of recent years.
Then reports began filtering out of China of a mysterious flu-like virus that was causing respiratory problems and killing people in the city of Wuhan in the Chinese province of Hubei. The reports subsequently became reality: The virus had become so deadly and so rampant that the Chinese government placed Wuhan, the largest city in central China, on a lockdown. Alarmed, Hong Kong and the countries nearest the Chinese mainland—Taiwan, Japan and South Korea—banned travel to and from Wuhan. All hell was beginning to break loose because the deadly potential of the virus, now designated as novel coronavirus or COVID-19, had come to be recognized.
By late January, the Philippine government decided that it had to take action on an epidemic that was showing signs of becoming a full-blown world health problem. At first it placed a ban—with minimal exceptions—on travel to and from China. Soon after, it extended the travel ban to Japan and South Korea. All the Northeast Asian countries are hosts to large OFW (Overseas Filipino Worker) communities.
With the numbers of COVID-19 infections and deaths steadily rising, President Rodrigo Duterte decided to swallow the most bitter medicine of all: A lockdown. At the outset, the lockdown covered Metro Manila only; the effectivity date was March 15. Two days later, the whole of Luzon, which includes the growth centers of Calabarzon and Region IV-A, was placed under lockdown.
With the ban on foreign travel in January—this government action affected three of the biggest sources of tourism revenue—and the locking down of Luzon during two entire weeks of March, this country’s GDP growth in 2020’s first quarter is bound to be substantially lower. And with Luzon non-operational for an entire month—and possibly one and a half months—the second quarter is bound to come close to being a virtual write-off in GDP growth terms.
A great deal, thus, depends on the July-to-September quarter. On the one hand, a strong recovery in that quarter is sure to have a strong positive impact on 2020’s final quarter. On the other hand, continued weakness in the third quarter will mean that this country’s GDP growth will be minimal at best in 2020. The 2-percent growth that an international financial institution has projected may then come to pass.
The third quarter has to be a good quarter for the Philippine economy. Otherwise, 2020 will be a year of near-total victory for the coronavirus.