PH posts worst GDP contraction since World War 2 with -9.5 pct growth rate in 2020

ABS-CBN News

Posted at Jan 28 2021 10:09 AM | Updated as of Jan 29 2021 05:43 PM

A slum area in Pasay City with the Makati skyline in the background. Mark Demayo, ABS-CBN News​

MANILA - The Philippines' gross domestic product contracted anew in the fourth quarter shrinking 8.3 percent to bring the full year 2020 growth to -9.5 percent, the state statistics agency said Thursday.

In contrast, the Philippine economy grew 6.7 percent in the fourth quarter of 2019, and posted a full-year growth rate of 6 percent then. 

Philippine Statistics Authority

“Among the major economic sectors, Agriculture, Forestry, and Fishing registered -2.5 percent growth rate in the fourth quarter of 2020, while Services and Industry posted -8.4 percent, and -9.9 percent respectively,” the Philippine Statistics Authority (PSA) said.

Other sectors that posted negative growth rates were construction, which posted -25.3 percent growth; other services at -45.2 percent; and accommodation and food service activities at -42.7 percent, the PSA said.

Thursday's data showed the economy grew a seasonally adjusted 5.6 percent quarter-on-quarter, slowing from an 8 percent growth in the September quarter.

Government expenditure grew 4.4 percent year-on-year in the fourth quarter, while household spending declined by 7.2 percent. 

Last year's full-year negative GDP growth is the first contraction since 1998's 0.5 percent decline, which was triggered by the Asian financial crisis. 

The GDP contraction in 2020 is also worse than the 7 percent contraction recorded in 1984, making it the steepest post-war slump in Philippine history, using available PSA data dating back to 1947.

The contractions of 16.9 percent in the second quarter and 11.4 percent in the third quarter were the two worst quarterly decline based on available data.

ABS-CBN Data Analytics Group

In contrast, Vietnam, which was able to quickly control the spread of the novel coronavirus posted a positive growth of 2.9 percent. 

Singapore, which was able to control the outbreak despite initial setbacks, posted a less steep -5.8 percent decline. 

The National Economic and Development Authority blamed the contraction on the disruptions caused by the COVID-19 pandemic. 

"Private consumption remained weak. While the government relaxed restrictions on the supply side by allowing more public transport and establishments to operate, restrictions on the demand side notably the mobility of children and families prevented private consumption from making a stronger comeback," said Socioeconomic Planning Secretary Karl Chua during the briefing.

The government has eased coronavirus curbs from the strictest level imposed in the early part of 2020, but partial restrictions remain in place in the capital region as local cases reached over half a million and fatalities exceeded 10,000. 

Chua added that the prospects for 2021 were "encouraging", reiterating a previous government forecast for 6.5 percent to 7.5 percent growth this year.

Matthew Cabangon, president of AAA Southeast Equities said The GDP number confirms that 2020 was the worst economic year in Philippine recorded history. 

“The bright side however is that this is a totally backward-looking statistic," Cabangon said. 

He said that if the recovery trend in third and fourth quarters of last year continues in 2021, "we will also see extreme GDP figures for 2021, but in a positive way.” 

Manny Ocampo, managing director at Investment and Capital Corp of the Philippines, meanwhile said the fall in the growth rate was deeper than expected. 

“The lockdowns really did not help and construction came in way late already to have any meaningful boost,” Ocampo said. 

Manny Lisbona, president of PNB securities said the GDP figures were worse than the consensus of 9 percent, which reflected the extent of the damage done by the pandemic. 

“I don't think we are out of the woods just yet, given the apparently mixed feedback on the efficacy of the various vaccines available,” Lisbona said. 

Mike Enriquez, chief investment officer of Sun Life Philippines, also said the contraction was slightly worse than their forecast. 

“Private consumption was still sluggish,” Enriquez said, adding that if these trends persist, the weakness of the economy may persist in the first quarter of the year. 

Raul Ruiz, acting president at RCBC Securities, said the GDP figures were “in line with consensus forecast.” 

“So hopefully that would calm the market and encourage bargain hunting,” Ruiz added. 

Alvin Ang, a professor of economics at the Ateneo de Manila University, meanwhile is not too optimistic about 2021 recovery. 

Ang said if the general community quarantine is maintained and government support & spending remain unchanged, the Philippines is looking at 3 percent GDP growth this year. 

GDP may grow 4 percent if restrictions are lifted, an efficient vaccine rollout is in place and the government boosts spending, he added.

Agriculture has the best chance of driving recovery, Ang said.