The economy grew in the second quarter at its fastest pace in more than three decades, but an official warned Tuesday of “speed bumps” as coronavirus restrictions were tightened to combat surging infections.
Gross domestic product (GDP), or the total value of goods and services produced by the economy, expanded 11.8 percent on-year, the Philippine Statistics Authority (PSA) said, after five straight quarters of contraction.
The increase — the best since the last three months of 1988 – was driven by a rebound in construction activity and consumer spending.
But it came off a 17-percent slump in the same period last year when the country endured its first crippling lockdown that wiped out millions of jobs.
“The robust performance is driven by more than just base effects – it is the result of a better balance between addressing COVID-19 and the need to restore jobs and incomes of the people,” Socioeconomic Planning Secretary Karl Chua told a briefing.
But Chua warned hopes for “continuous positive growth” could be erased by the current two-week lockdown in the National Capital Region – which accounts for a third of the economy — and other areas aimed at slowing the spread of the hyper-contagious Delta variant.
“There are speed bumps given the ECQ (enhanced community quarantine) in Metro Manila and other parts of the country,” Chua said.
“The longer we have ECQ, then the higher the risk that we may not achieve our target.”
Malacañang on Tuesday welcomed the country’s exit from recession in the second quarter, hopeful that this gain would be sustained until the end of the year.
Presidential spokesman Harry Roque expressed optimism that the country’s economy would continue to recover despite the two-week ECQ over Metro Manila and other areas.
House Majority Leader Martin G. Romualdez on Tuesday credited the “spirit of teamwork and cooperation” in the Philippines as the reason for the second quarter growth.
“We rejoice with the news that the Philippine economy grew 11.8 percent, year-on-year, in the second quarter. This officially marks the end of a pandemic-induced recession that bogged us down for 15 months,” Romualdez said.
“I credit this to the spirit of teamwork and cooperation that Filipinos have shown in our fight against the COVID-19 pandemic. The solidarity among branches of government, as well as the private sector, is unprecedented,” the president of the Lakas-Christian Muslim Democrats party added.
Romualdez said it was also wise for the Duterte administration to anchor the country’s economic recovery on a massive COVID vaccination campaign, which is now picking up steam.
“We are on the right track in recognizing mass vaccination as the key to economic rebound. Despite limited global supply, our vaccination is picking up steam and is getting the results that we wanted for our economy,” said Romualdez, also president of the Philippine Constitution Association (Philconsa).
The tightened restrictions, which include a ban on restaurant dining and an eight-hour nighttime curfew, are expected to cost the economy about $3 billion (P150 billion) a week in lost output.
The second quarter – which overlapped another lockdown in April – contracted 1.3 percent from the first three months of the year, the data showed.
ING senior economist Nicholas Mapa predicted “a similar setback” in the third quarter because of reduced mobility.
National Statistician Dennis Mapa said in an online briefing the second-quarter growth was driven primarily by the expansion in all sectors except agriculture.
The main contributors to the growth were manufacturing, 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 growth of 20.8 percent and 9.6 percent, respectively.
Meanwhile, agriculture, forestry, and fishing contracted -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.
On the other hand, the government’s final consumption expenditure dropped by -4.9 percent in the second quarter of 2021.
Economic managers composed of Finance Secretary Carlos Dominguez III, Chua, and Budget officer in charge Tina Rose Marie Canda said the policy to allow both public and private construction even during the lockdown in March and April showed that the economy can be revived while addressing COVID-19 infections.
In the second quarter, public construction expanded further by 49.7 percent, continuing the previous quarter’s growth of 25.3 percent. Private construction also grew by 19.1 percent, a reversal from the last quarter’s contraction of 37.2 percent. These resulted in an overall growth of 25.7 percent for the construction sector.
With improving consumer confidence, household spending grew 7.2 percent as millions regained their jobs and income sources in the first half of 2021.
Moreover, foreign trade substantially recovered with imports and exports growing at 37.8 percent and 27 percent, respectively. They said this strong rebound reflects increased domestic demand and the recovery of the country’s trading partners.
Only government expenditure contracted, at -4.9 percent, primarily due to the high base effect from the rollout of the largest-ever emergency subsidies in the second quarter of 2020.
“In summary, almost all sectors bounced back despite the imposition of the ECQ and the MECQ last April and May 2021. This is 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,” they said.
They said unlike last year’s ECQ where around 75 percent of the economy was 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 have 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.
But Michael Ricafort, chief economist of Rizal Commercial Banking Corp., told Manila Standard that the two-week ECQ in NCR would be a drag on third-quarter growth.
Ricafort said the ghost month for most of August 2021 could also potentially slow down economic activities, somewhat mitigating the adverse economic effects of the two-week ECQ on NCR.
Ricafort said increased infrastructure spending to pump-prime the economy and as part of preparations for the May 9, 2022 elections would be a major pillar for economic recovery in terms of creating more jobs and more economic activities nationwide.
Malacañang on Tuesday welcomed the country’s exit from recession in the second quarter, hopeful that this gain would be sustained until the end of the year.
Presidential spokesman Harry Roque expressed optimism that the country’s economy would continue to recover despite the two-week ECQ over Metro Manila and other areas.
House Majority Leader Martin G. Romualdez on Tuesday credited the “spirit of teamwork and cooperation” in the Philippines as the reason for the second quarter growth.
“We rejoice with the news that the Philippine economy grew 11.8 percent, year-on-year, in the second quarter. This officially marks the end of a pandemic-induced recession that bogged us down for 15 months,” Romualdez said.
Albay Rep. Joey Sarte Salceda, chairman of the House committee on ways and means, said the fast rollout of COVID-19 vaccine doses and mitigating measures against the Delta variant will determine whether the country sustains recovery in the second half of 2021.
“If we are able to stop Delta in its tracks and avoid the kind of surges Indonesia and other ASEAN neighbors are experiencing, we will perform very strongly in H2,” Salceda said.
“That will also require quick vaccination, funding for genome sequencing, effective testing, treatment, and isolation, and some rhyme and reason to our contact tracing efforts. We have to get it right. If we do, we will permanently be out of the hole. If we get the health side wrong, we’re still very much at risk of contracting again,” Salceda warned.
Senator Grace Poe, meanwhile, said that while growth may be the highest since 1988, the economy is far from being back to its pre-pandemic levels.
“We may have grown by 11.8 percent from the 17 percent contraction of last year but that’s nothing to brag about because much of it is base effect,” she said.
Poe said what the people need urgently now is for the government to spend their tax money on the health sector by paying the hospitals and health care workers, while protecting and creating jobs.
Senator Joel Villanueva said it was too early to tell if the growth can be sustained. He said the recovery hinges on the government’s ability to control the spread of COVID-19.
Senate President Pro Tempore Ralph Recto said the economy grew 4 percent during the first half and would probably end the year with the same rate of growth. He added that it would take a year or two before GDP would approach its 2019 level.