PH slips into recession

THE Philippines slipped into “technical recession” in the second quarter of 2020, contracting by 16.5 percent as the lockdown to stem the spread of the coronavirus disease 2019 (Covid-19) took its toll on industries and businesses, the Philippine Statistics Authority (PSA) reported on Thursday.

It was the lowest quarterly growth since 1981. A technical recession occurs when the gross domestic product (GDP) shrinks for two consecutive quarters. The second-quarter decline is far worse than the -0.7 percent in the first and a reversal from the 5.4 percent growth in the second quarter of 2019.

It also exceeded the -11 to -14 percent projection of economists earlier polled by TheManilaTimes.

“The last time we had a double-digit negative growth that happened in the third quarter of 1982 which is -10.7 percent and followed by quarter one of 1985 which is -10.9 percent,” said National Statistician Dennis Claire Mapa.

The agriculture sector grew by 1.6 percent in

the second quarter, up from the 0.7 percent posted in the same period last year.

Industry plunged by 22.9 percent from 2.5 percent a year ago as manufacturing and construction were hit hard by lockdowns.

Services shrank by 15.8 percent from 7.5 percent in 2019. Transportation and storage; wholesale and retail trade; repair of motor vehicles and motorcycles; accommodation and food service activities; real estate and ownership of dwellings; professional and business services; education; and human health and social work activities practically ground to a halt.

On the expenditure side, declines were seen in household final consumption, which dropped by 15.5 percent; gross capital formation (-53.5 percent); exports (-37.0 percent); and imports (-40 percent).

Mapa said on the demand side, only government final consumption expenditure and breeding stocks and orchard development survived the second- quarter onslaught, notching 22.1 percent and 2.2 percent, respectively.

Net primary income or NPI from the Rest of the World dropped by 22 percent and gross national income or GNI by 17 percent.

“Our country is facing the biggest crisis in nearly eight decades. How we respond to the Covid-19 pandemic and how united we are in facing this common threat will determine the course of our nation,” said National Economic and Development Authority Acting Secretary Karl Chua in a briefing.

Chua said reverting to a modified enhanced community quarantine “is an opportunity to address new challenges brought about by the virus. If we use this time well, we can improve our health care system and pave a stronger foundation for the resumption of the economy. For the time being, the economic team will be providing the necessary fiscal support, as far as available resources can afford.”

The proposed Bayanihan 2 bill; the Build, Build, Build program; and the 2021 budget are among the props that the country needs to recover from the effects of the pandemic, he said.

“These are extraordinary times and the road ahead of us continues to be challenging and uncertain. At this critical juncture in our history, working together to address this unprecedented crisis is our best recourse,” said Chua.

Economists believe that with the steep dive in the second quarter, the Philippines will likely face one of the slowest recoveries in the Asian region.

“A failure to contain the virus, continued restrictions to movement and inadequate policy support mean the Philippines is also likely to experience one of the region’s slowest recoveries,” Capital Economics Asia economist Alex Holmes said in a report.

Holmes said that there was still no sign that the virus was being brought under control.

“The economic costs of trying to contain the virus is leaving large scars to household and corporate balance sheets, which will weigh heavily on demand for many months to come,” he said.

In a separate report, ANZ Research noted that the country’s growth outlook was challenging.

It said the reimposition of mobility restrictions would impede growth recovery.

“Real time indicators signal a very modest improvement. Private investment is likely to remain weak as well on the back of subdued business sentiment and excess capacity,” said ANZ Research.

In the face of dismal growth figures, the government will be “working round the clock” to ease the socioeconomic impact of the coronavirus pandemic and ensure sustainable recovery, Malacañang spokesman Harry Roque Jr. said Thursday.

“While we understand that the decrease in our gross domestic product growth rate is a result of the enhanced community quarantine/ modified enhanced community quarantine, we are concerned by the steep drop which is much worse than what our government economists had expected,” Roque said in a statement.

“The Philippines, we underscore, is not the only nation facing this economic situation. Covid-19 has had an adverse economic impact on countries like Singapore, Indonesia, the United States, France, Spain, Mexico,” he added.

Roque said the administration’s economic managers put together a phased and adaptive economic recovery program, the PH-Progreso or Philippine Program for Recovery with Equity and Solidarity, to fight the pandemic’s effects on business and livelihood.

He said the government “recalibrated our budget for next year and restarted our Build, Build, Build programs, subject to health and safety protocols to create jobs.”

The government recovery efforts must be complemented by the people’s behavior during the health crisis, according to the heads of the central bank and the Finance department.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno said a big part of the success in overcoming the crisis can be attributed to leadership, clear messaging, and human behavior.

“Each individual has a role to play in winning the war against the virus. The virus won’t go away soon, so we have to learn to live with it,” he said in a message on Thursday.

Diokno said the comprehensive and nationwide lockdowns, which caused heavy damage to the economy, jobs, livelihoods and incomes, were over.

The focus of national leaders should be on more localized villagelevel or building-level containment of the virus, he noted.

For Finance Secretary Carlos Dominguez 3rd, the country’s recovery lies in the people’s ability to either live with the virus or to conquer it.

“It is very important for us to learn how to live with it and to also not get discouraged when we have spikes. The whole world right now is experiencing spikes. It’s not only the Philippines,” he said during the Security Bank Economic Forum 2020 held on Thursday.

Economic managers expect the economy to recover with a 6.57.5 percent GDP growth next year until 2022.

Some senators had different reactions to the onset of recession.

“I expected it. It will be hard for people to get back to work unless the government can prove that it can beat the virus. So far, the people, consumers, workers, investors think the government is losing the battle. There is a lack of confidence. Hopefully, we can get our act together in the next two weeks,” Senate President Ralph Recto said.

“We lost P1.4 trillion during the first half. About P10.8 billion daily from April to June alone. The economy is gasping in the ER (emergency room) and a more robust stimulus package is the ventilator that it needs,” he said.

Sen. Juan Edgardo “Sonny” Angara, chairman of the Senate finance committee, said all economies of the world are in recession, and what is important is the recovery strategy which a country pursues.

Angara said the Bayanihan 2 would help initially but many commented it should be followed by other economic actions.

For Sen. Sherwin Gatchalian, vice chairman of the Senate economic affairs committee, the economic contraction will push many families back into poverty and eventually worsen hunger and malnutrition.

“At this point, it is important for the government to guarantee that there is food on the table for every Filipino family. I implore the government to expedite the distribution of the second tranche of the Social Amelioration Program to the 18 million low-income beneficiaries since most areas have again been placed under stricter quarantine protocols,” said Gatchalian in a statement.