"News of the end of the recession was met with great disbelief."
When the government reported an 11.8-percent gain in the country’s output of goods and services or GDP in the second quarter, it declared the end of the recession. The news of the end of the worst Philippine recession in 100 years was met with great disbelief.
Recession is defined as two consecutive quarters of negative economic growth. The GDP contracted by -0.7 percent in the first quarter of 2020, by a whopping -17 percent in the second, -11.6 percent in the third, and by -3.5 percent in the fourth. The total loss in output, -9.6 percent in the whole of 2020. Plus another drop of -4.2 percent in the first quarter of 2021.
Suddenly, after five quarters of negative growth, the economy gained by 11.8 percent during the second quarter this year. The growth was mainly base effect.
The loss of -17 percent in the second quarter of 2020 cannot be erased by an 11.8 percent second quarter 2021 growth. That is because 100 minus 17 is 83, and 83 plus 11.8 is 94.8—5.2 short of the original 100 in 2019, before the pandemic.
That the situation is bad is easy to demonstrate. Just count how many people have been looking for you and asking for financial help. People are poor, hungry, jobless—under the most severe and longest lockdown in the world.
Still, Economic Planning Secretary Karl Kendrick Chua sounded buoyant when he faced the House Committee on Appropriations on Aug. 26 last week to backstop the administration’s record P5.024-trillion budget for 2022.
“They (the economic fundamentals) remain encouraging and will allow us to recover to pre-pandemic levels sometime at the end of 2022, if not early 2023,” the secretary general of the National Economic Development Authority (NEDA) told the House budget planners.
He added: “We have revised our growth targets for 2021 to 4 to 5 percent positive growth. Next year, growth will be 7 to 9 percent before moderating to our long-term growth of around 6 percent to 7 percent.”
Recovery hinges on three things: “One, acceleration of the vaccination program; two, the continued safe reopening of the economy while adhering to the health protocols; and three, the full implementation of our recovery package, which includes the present 2021 budget, the CREATE law, and the FIST law.”
The CREATE Act lowers the corporate income tax rate from 30 percent to 25 percent beginning July 1, 2020. It is supposed to transfer as much as P7 trillion in real money to the private sector.
Signed in February, the FIST Law (Republic Act 11523) opens doors for banks to unload their bad loans to asset management companies called FIST corporations (FISTCs).
As for the P4.5 trillion 2021 budget, it is so big that the technicians at the Department of Health, Budget Department, and Public Works don’t even know how to spend it. So they spent it the old-fashioned way—buy mostly unneeded items at gross overpricing.
“Our COVID-19 vaccination program is on track,” insists Secretary Karl Chua. About 48.5 million vaccine doses were available as of Aug. 22, 2021, enough to vaccinate 30 percent of the adult population. But MMDA Chair Ben Hur Abalos vows to inoculate 70 percent of Metro Manila’s adult population by this week, if not earlier.
The national capital region accounts for 32 percent of total GDP. NCR is under MECQ—the Level 2 of lockdown, as is half of the economy. About 15 percent of the archipelago is under the most liberal lockdown, the GCQ-general community quarantine, displacing 15.647 million workers.
Karl cites figures for his optimism.
Unemployment rate is down from a peak of 17.7 percent in the second quarter of 2020 to around 7.7 percent. Underemployment is down from 18.9 percent to 14.2 percent. This is not very far from the pre-COVID-19 pandemic of around 13 to 14 percent.
The loosening of quarantines meant more jobs for more people.
“As of June 2021, we have created a net of 2.5 million jobs compared to the pre pandemic level. And we will continue to monitor this because this is one of the important indicators that will underpin our recovery,” he says.
“The sustainability of this (11.8 percent second quarter GDP) growth in the coming quarters, of course will depend on the actions that we will take in dealing with the virus,” cautioned the NEDA chief. In the second quarter of 2021, the economic growth has been broad-based. It has been supported by the growth in household final consumption at 7.2 percent.”
Capital formation or investment is 75.5 percent; exports and imports are also doing well at 27 percent and 37.8 percent, respectively.
Government spending is negative because in the second quarter of 2020, we embarked on one of the biggest fiscal stimuli to support the height of the quarantine.
“We are also seeing the industry and services sector contributing strongly. However, agriculture was pulled down by factors like the African swine fever which reduced our pork supply,” says Chua.
Before COVID struck, the Philippines was supposed to have been a high middle income country this year, with only 14 percent of the population considered poor, down from 21.6 percent when Rodrigo Duterte became president in 2016. Karl claims Duterte saved six million Filipinos from poverty from2016 to 2019. Pulse Asia would love to track down those six million.
Moving forward, Karl hopes for the escalation of the National ID system which he says could bring about three major benefits: one, enable all low-income families to have a bank account; two, to track the vaccine rollout; and three, monitor ayuda (cash aid) from the government. About 50 million Filipinos are supposed to have an ID. Only 1.2 million have an ID so far.
“Although there are speed bumps ahead, given the current MECQ in Metro Manila and other parts of the country, we are now better equipped to sustain continuous positive growth.”
“Accelerating the vaccination is key to our recovery. The Duterte administration remains steadfast in its commitment to save lives from COVID and non-COVID factors, protect communities and preserve their livelihoods amid the pandemic.”