The Philippine economy sank 4.2 percent in the first quarter from a year ago, but showed signs of gradual recovery from the 8.3-percent contraction in the fourth quarter, data from the Philippine Statistics Authority show.
National statistician and civil registrar general Dennis Mapa said in an online briefing the first-quarter decline marked the second-longest recession the country experienced with five quarters of contraction since the 0.7-percent drop in the first quarter of 2020.
Mapa said the longest was during the latter part of the Marcos administration, from the fourth quarter of 1983 when GDP declined by 3.2 percent to fourth quarter of 1985 at -2.1 percent.
Data, however, showed the economy managed to grow by 0.3 percent compared to the fourth quarter on a seasonally-adjusted basis.
“Our economy may slow down in early 2021 given recent developments, but we will not backpedal. The country’s strong economic position before the pandemic and improving economic data in recent months point to an economy that is on the mend,” the government’s economic managers said in a joint statement.
In a joint statement, economic managers composed of Finance Secretary Carlos Dominguez III, Socioeconomic Planning Secretary Karl Kendrick Chua and Budget Secretary Wendel Avisado said the latest economic performance showed the limit of economic recovery without any major relaxation of the quarantine policy.
“Thus, once the present spike is over, we can implement quarantine relaxations in a phased approach to boost our recovery this year. For instance, we can move the NCR towards MGCQ, allow families and their children to participate in the economy, and restart face-to-face schooling,” they said.
“We will complement the safe reopening of the economy with the timely and full implementation of our recovery package. Some P2.76 trillion or 15.4 percent of GDP of fiscal, monetary, and financial resources have been allocated for this since last year,” they said.
“We will accelerate the vaccination program to help boost business and consumer confidence. As of May 9, 2021, more than 2.4 million doses have been administered to our health care workers, senior citizens and persons with comorbidities. We have also begun the inoculation of frontline workers in essential economic sectors,” they said.
Data showed that the main contributors to the first-quarter GDP decline were construction which weakened by 24.2 percent; other services, -38.0 percent; and real estate and ownership of dwellings, -13.2 percent.
Contributors to growth were led by financial and insurance activities which grew 5.2 percent; public administration and defense; compulsory social activities, 7.5 percent; and human health and social work activities, 11.7 percent.
Among the major economic sectors, agriculture, forestry and fishing declined by 1.2 percent in the first quarter while services and industry contracted by 4.4 percent and 4.7 percent, respectively during the period.
The PSA said that on the demand side, household final consumption expenditure declined by 4.8 percent, along with gross capital formation, -18.3 percent; exports, -9.0 percent; and imports, -8.3 percent.
Government final consumption expenditure grew by 16.1 percent in the first quarter.
The net primary income from the rest of the world declined by -75.8 percent, leading the gross national income to drop by 10.9 percent in the first quarter.
The National Task Force against COVID-19 said some 13.5 million doses from various sources were expected to arrive by July 2021 which would help achieve the goal of inoculating 100 percent of adult population or some 70 million Filipinos by the end of 2021.
Mapa said the Philippines posted the largest contraction among ASEAN-5 countries. Indonesia’s economy declined by 0.7 percent; Malaysia, -0.5 percent; and Thailand, -3.5 percent. Vietnam grew by 4.5 percent.
Economic Planning Secretary Karl Kendrick Chua said that despite the decline, the first-quarter print was an” improvement” based on a quarter-on-quarter basis.
“This will support our growth trajectory of 6.5 to 7.5 percent [for this year]. We expect there is a strong reason to believe that there will be a positive growth for the succeeding quarters,” Chua said.
Chua, however, said downside risks to the growth might have come from the imposition of ECQ and MECQ in the early part of the year to curb the further spread of the pandemic. But he said the quarantines were now very different from the strict ones implemented last year.
“We have open transport system and workers can still go to work. The curfews exempt workers going to work. We still have eight months to catch up with the 6.5 to 7.5 percent projection. We will reassess how the first quarter performance will affect the full-year growth,” Chua said.
ING Bank Manila senior economist Nicholas Mapa said the partial lockdowns in the first quarter weighed on consumer sentiment and overall economic activity. Almost all major sectors of the economy contracted with only government expenditures managing to post an expansion of 16.1 percent with fiscal authorities deploying the second round of stimulus to help support the recovery.
“Household consumption, which accounts for more than 70 percent of GDP slipped by 4.8 percent, the fourth straight quarter of contraction as access to incomes remain depressed with the unemployment rate at elevated levels,” Nicholas Mapa said.
“The negative impact of these renewed lockdowns quickly surfaced in the latest PMI [Purchasing Managers’ Index] report which showed the manufacturing revert back to contraction in April after a three-month streak of expansion to start the year. Recent lockdowns are also expected to weigh on the services sector the most with personal services not allowed to operate due to social distancing regulations,” the bank economist said.
The ING economist said while second-quarter GDP was expected to return to growth, “we may have to trim our expectations especially if partial lockdowns are extended through May.”
He said that the attention now shifted to the Bangko Sentral ng Pilipinas policy meeting on Wednesday with monetary authorities widely expected to hold policy rates unchanged.
“BSP Goverrnor Diokno has signaled his preference to keep monetary support for as long as the economy is in recovery mode, and we continue to price in a steady policy rate for the balance of 2021. Inflation has remained above the 2-4 percent target for four months straight although price pressure appear to be stabilizing as authorities move to implement supply side remedies to help lower the cost of food items,” Nicholas Mapa said.
He said the dimming outlook for growth translated into muted corporate demand for foreign currency as firms put off large-scale expansion plans.