In just one quarter, the Philippine economy which was already slowing down slid into contraction with gross domestic product (GDP) declining by 0.2% in the first quarter of 2020 due mainly to the coronavirus disease 2019 (COVID-19) pandemic.
In its report on May 7, the Philippine Statistics Authority (PSA) said this was the first contraction since the Asian financial crisis in 1998, when Philippine GDP contracted by 0.5%.
GDP, or the sum of goods and services produced in the country, declined by 0.2% in the first quarter of 2020 after growing by 5.9% in 2019.
Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua described the 0.2% decline as “slight” and “respectable” compared to the impact of the 1998 crisis.
He and Bangko Sentral ng Pilipinas Government Benjamin E. Diokno are confident that the economy will recover this year, although they could not agree on what shape it will take.
Chua said recovery will be V-shaped and will probably begin in June, as soon as the economy restarts after government ramps up diagnostic testing for the novel coronavirus, or SARS-CoV-2, the agent that causes COVID-19.
Diokno, on the other hand, believed that recovery will be U-shaped and will begin in the fourth quarter of 2020 yet.
Both Chua and Diokno said the second quarter output would still be in negative territory.
“In the second quarter, we know that April will be very bad because the ECQ extends but we also know that starting May, two-thirds of the country’s LGUs have been put in GCQ and that is basically light that we are seeing at the end of the tunnel,” Chua said in an online press conference on the country’s economic performance in the first quarter.
Under an ECQ, or enhanced community quarantine, economic activity is almost at a standstill as only establishments and factories engaged in the manufacture and distribution of essential goods and services are allowed to operate.
Public transportation systems are suspended and the people are mandated to stay home, except those working at the front lines of the battle against COVID-19 and those working in companies providing basic necessities.
Under a GCQ, or general community quarantine, non-leisure establishments aside from those engaged in basic necessities may reopen and public transportation systems are allowed to resume at limited capacity to comply with social distancing protocols.
Diokno also believed the second quarter will still be marked by a economic contraction.
But unlike Chua who is optimistic that the economy will start to recover in June, Diokno said the economy is headed for contraction up to the third quarter.
"We are forecasting a contraction in the second quarter, and probably in the third quarter, that’s why we’re talking of a U-shaped recovery. But we are expecting a strong bounce-back in the fourth quarter,” he said in a separate online briefing.
He said, however, that the Philippines may not slide into recession this year.
It should be noted that a technical recession happens when economic output contracts for two consecutive quarters.
If the Philippine economy contracts in the second and third quarter after the contraction in the first quarter, it would technically be in recession.
The government is now ramping up testing for the virus to pave the way for the restart of the economy.
By May 30, the National Task Force Against COVID-19 targets to have a total of 78 accredited testing laboratories operational so that the number of tests that would be conducted would jump to 30,000 per day.
At present, 22 accredited laboratories process an average of 5,000 diagnostic tests per day.
In its report on May 7, the Philippine Statistics Authority (PSA) said GDP declined by 0.2% in the January to March 2020 period compared to the 5.7% growth in the same period in 2019.
The economy has been slowing down since 2016 and in 2019, GDP grew by only 5.9%, the slowest in eight years and the first sub-6% growth since the 3.7% in 2011, because of the delayed approval and implementation of the budget.
The PSA said the main contributors to the decline were: manufacturing; transportation and storage; and accommodation and food service activities.
The agriculture, forestry, and fishing, and industry sectors contracted by 0.4 percent and 3.0 percent, respectively.
The services sector posted a minimal growth of 1.4 percent during the period.
On the expenditure side, items that declined were: gross capital formation (GCF), 18.3 percent; exports, 3.0 percent; and imports, 9.0 percent.
Meanwhile, household final consumption expenditure (HFCE) and government final consumption expenditure (GFCE) posted positive growth rates of 0.2 percent and 7.1 percent, respectively.
Net primary income (NPI) from the rest of the world dropped by 4.4. percent resulting in the 0.6 percent contraction in the gross national income.
Estimates on the first quarter 2020 National Accounts of the Philippines (NAP) are based on the 2018 base year following the recent revision and rebasing of the NAP series.
The government has forecast a full-year GDP growth of zero in 2020. A worst-case scenario would see output declining by 0.1%.
The novel coronavirus has killed 685 individuals in the Philippines as of May 7, 2020. Total cases of infection breached the 10,000 mark on May 6 and reached 10,343 on May 7.
The virus has killed 247,503 people and infected more than 3.58 million worldwide as of May 6, the World Health Organization said. (Ventures Cebu)