Both manufacturing and trade showed a strong rebound in the first half, before Metro Manila went back to the most stringent form of lockdown in August amid concerns over the spread of the more contagious Delta variant of COVID-19.
While veteran economists would say that the economy was three years removed from the pre-pandemic level, Trade Secretary Ramon Lopez said the robust 11.8-percent expansion of the economy in the second quarter is a telltale sign that the nation is moving towards the pre-pandemic levels, albeit in a slow and painful process.
“This growth was unexpected but we welcome it, definitely. Prospects for 2021? We’re kind of seeing a robust second quarter, and third and fourth quarter, as well. We see continuing positive GDP [gross domestic product] growth. The 11.8-percent [growth] is of course is higher rate than expectation. It will give us the momentum to start the recovery process,” Lopez said.
He said the remarkable growth was a result of the government’s continuing efforts to safely balance lives and livelihood through calculated and calibrated measures to manage the risks that come with reopening the economy.
“The robust performance was sustained as we focused the restrictions on the less essential activities, while allowing the rest of the economy, especially the essential and labor-intensive sectors such as the exports and BPO sectors to operate, so as to save jobs and income,” Lopez said.
Snippets of recovery
Philippine exports surged 17.6 percent in June, bringing in about $6.51 billion in revenues. From January to June, export receipts were 20.9 percent higher at $35.9 billion, compared to the same months in 2020.
The growth was attributed to the reopening of the global markets like the US, China and the EU and the continuing policy to keep export operations at full capacity despite the lockdowns.
Lopez said consumer spending is also on the rise because of increased mobility and a gradual return to the pre-pandemic level of economic activity.
“We are seeing an increasing shift of economic growth in Asia, and the Philippines is ready to participate in that growth. With the reopening of more economic activities and more aggressive vaccination rollout in the country, our balanced and calibrated approach manifested a continued strong export performance,” he said.
“We are positive that we will continue to see an upward movement in our export performance, as we allow 100-percent operating capacity of our exports sector even during the enhanced community quarantine. In our efforts not to disrupt export activities, we expect to maintain the acceleration of our growth rate and continue to provide jobs for our people. There is still room for more growth for Philippine exports,” he said.
Electronics remained the country’s top exports, growing 21 percent in the first half over the same period last year and accounting for more than 60 percent of the total merchandise exports.]
Most exports considered as industry inputs are on the rise, reflecting the general uptick in global industrial activity. Exports of machinery and equipment, cathodes of refined copper, metal components and copper concentrates posted double-digit growth rates over the first half of 2020.
Full capacity
Another significant development is the improving state of local manufacturing. Based on the latest IHS Markit Purchasing Managers’ Index, the index for June 2021 rose to 50.8, as operating conditions improved, with the gradual easing of quarantine and allowing higher operating capacities in several sectors.
According to the report, the uptick was marginal as the country continued to face modified and enhanced community quarantine measures following a rise of COVID-19 cases. Input costs rose with material shortages, reportedly the main driver of inflation.
Global demand for Filipino manufactured goods also rose for the second successive month (May and June) with a rate of growth that was stronger than the historical average, the report said.
The improvement in the PMI can be credited to a government policy allowing exporting industries to operate at 100-percent or at full-capacity. According to the Philippine Economic Zone Authority, about 98 percent of the companies inside the economic zones are operational with information technology and business process management taking the lead in the reopening of more enterprises.
During the enhanced community quarantine and modified ECQ in March and April 2021, the government allowed several more manufacturing and essential sectors to operate.This had multiplier effect, resulting in a broad-based multi-sectoral expansion. The Department of Trade and Industry thus maintains its projection of P1.25 trillion in approved investments for the year, which should be up 10 percent from P1 trillion in 2020.
“Prospects for 2021 are encouraging and will allow us to recover to pre-pandemic levels in 2022. This will precent long-term scarring and productivity losses,” Lopez said.
He said among the identified enablers of economic recovery are the timely implementation of an intensified vaccination program; re-opening of the economy at the appropriate time with all safeguards; implementation if the recovery programs like the CREATE Law, Bayanihan 1 and 2, Financial Institutions Strategic Transfer Act, “Build, Build, Build” program and the 2021 budget; and, passage of key reforms.
State of MSMEs
Meanwhile, about 16 percent of almost 2 million micro, small and medium enterprises were still closed, based on the recent monitoring by the DTI.
The department said it continues to capacitate the MSMEs in achieving larger marketability to help them pivot to the digital space and survive the new trends in transacting business.
Apart from loan programs provided for under Bayanihan 1 and 2, the DTI strengthens the One Town One Product business concept.
“We believe that MSMEs will play essential role in helping to rebuild the economy back better so we can help uplift the lives of people in the pandemic future,” said Lopez.
OTOP is a priority stimulus program for MSMEs as the government’s customized intervention to drive inclusive local economic growth. The program enables localities and communities to determine, develop, support and promote products or services that are rooted in its local culture, community resource, creativity, connection and competitive advantage. It is a convergent initiative involving DTI and other government agencies and private sector.
MSMEs looking to restart their operations during the pandemic are encouraged to apply for interest-free, collateral-free government loans by creating an account at www.BayanihanCARES.ph.
Small business owners will have access to non-collateral loans through the website being maintained by the Small Business Corp., an attached agency of the DTI.
SBCorp is the program implementer of the P8-billion Bayanihan CARES (COVID-19 Assistance to Restart Enterprises), made available to MSMEs, cooperatives, hospitals, tourism businesses, and repatriated or displaced overseas Filipino workers.
Under the program, qualified loan applicants can apply for loans ranging from P10,000 to P5 million, depending on their pre-pandemic sales and business assets figures, if applicable.
SBCorp. so far approved 31,700 MSME loan applications. These correspond to a total loan amount of P4.84 billion.
Vaccination Efforts
As new infections continue, stressing the country’s already battered health system, Presidential Adviser for Entrepreneurship and Go Negosyo founder Joey Concepcion said local government units should aim to fully vaccinate 70 percent to 80 percent of their citizens if they wanted to avoid future lockdowns.
“When we talk of allowing only the vaccinated to enter public places like malls and restaurants, we can only do this in an LGU once we have achieved the target of getting 70 to 80 percent vaccinations in that LGU,” he said.
He said the unvaccinated could be protected by limiting their movements from their homes to their workplaces and vice-versa.
Concepcion said that creating these bubbles for fully-vaccinated people would enable certain places to be lockdown-free, thus give a chance for businesses to recover.
With increasing numbers of vaccinations in the NCR and across the country, the number of these bubbles can increase and eventually lead the country to have enough lockdown-free areas that can move on to the recovery phase, he said.
“We should not be short-sighted in our approach. Whatever action we take should be toward moving to allowing an environment to be lockdown-free. We should aim for a future that is lockdown-free for the whole country,” Concepcion said.