MANILA - Growth is back and the pandemic-induced recession of the Philippines is officially over.
Economic growth in the Philippines spiked to 11.8 percent in the second quarter of 2021, in spite of a return to tighter quarantine restrictions amid the worst spike in COVID-19 cases yet in the country.
However, part of the reason for the significant recovery was the low base of the economy in 2020.
In the second quarter of last year, the Philippine economy suffered its worst economic contraction on record, a 17 percent free fall, as the government instituted the tightest of quarantine restrictions.
Socioeconomic Planning Secretary Karl Kendrick Chua, and his fellow economic managers, meanwhile said the growth spike was "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,” Chua said.
The second-quarter growth rate was the fastest since the fourth quarter of 1988 when growth hit 12 percent. But unlike this year, there was no sharp downturn in 1988 from which a sharp upturn could come about.
In terms of quarter-on-quarter growth, Q2’s economic activity was actually slower compared to Q1. Second quarter GDP contracted 1.3 percent from the first three months of the year.
Chua blamed this on the tighter quarantine restrictions in April. While the country reopened a significant portion of the economy in the first quarter, a surge in COVID-19 cases toward the end of March pushed the government to tighten restrictions again.
“We imposed ECQ. From the first and second quarter, we had to tighten quarantine, and that explains the quarter on quarter," Chua said.
FAR FROM RECOVERED
The year-on-year expansion of 11.8 percent vaults the Philippines back amongst the leaders in economic growth in ASEAN.
However, the Philippines is still far from fully recovered from its pandemic-induced recession.
National Statistician Dennis Mapa said the country's GDP in the first six months of the year was P8.9 trillion, which was 3.7 percent higher than the first half of 2020 which was P8.6 trillion.
But compared to the P9.4 trillion GDP in the first half of 2019, this was still 6 percent lower, Mapa said.
In other words, the Philippine economy has yet to fully recover what it lost because of the pandemic.
Total real value lost (in pesos):
2020 = 1.86 trillion
2021 H1 = 563 billion
Loss from 2020 Q1 to 2021 Q2 = 2.42 trillion
Source: ABS-CBN Data Analytics, data from PSA)
The ABS-CBN Data Analytics Team estimates that the total real value lost in the first half of the year relative to pre-pandemic levels amounted to P563 billion. The total real value lost from the first quarter of 2020 to the second quarter of 2021 was P2.42 trillion.
As for hitting the government’s growth target of 6 to 7 percent for the year, Mapa said it is possible. He said that to hit the lower end of the growth range of 6 percent, GDP needs to grow 8.2 percent in the second half.
"On the other hand, if we want to hit 7 percent, then the economy should grow by 10.2 percent. These are all based on the computations of the PSA," Mapa said.
Chua said that to hit those targets, the current ECQ must be maximized through vaccination.
"Once we vaccinate more and more people, then we can open up the economy more safely," he added.
But Chua added that he is confident that the 6 percent to 7 percent growth goal will be met.
“Our ECQ today is more managed, unlike last year. We did not shut down public transport. Most workers are exempt from the curfew. These show we are learning to live with the virus and can mitigate the impact of the virus," Chua said.
Investment, household spending, and exports and imports all rebounded from contractions in previous quarters, but government spending contracted by 4.9 percent for the period. Chua blamed this on base effects.
“Last Q2 2020 we embarked on the biggest ever SAP (Social Amelrioation Program), biggest ever wage subsidy. We're normalizing from that big increase this year," Chua said.
On the supply side, agriculture contracted slightly, while industry and services rebounded sharply. The farm sector's woes were partly attributed to livestock problems arising from the African Swine Fever outbreak.