The Philippine economy declined by 0.2 percent in the first quarter of 2020, pulled down by sectors that were hit worst by lockdown — manufacturing, transport and accommodation and food services.
It was the first quarterly contraction of gross domestic product (GDP), the value of goods and services produced by the economy, since the fourth quarter of 1998 or during the Asian financial crisis, the Philippine Statistics Authority (PSA) said.
“The main contributors to the decline were: Manufacturing; Transportation and storage; and Accommodation and food service activities,” the PSA said.
Services, the biggest component of the economy, still grew by 1.4 percent but agriculture and industry declined by 0.4 percent and 3 percent following the enhanced community quarantine imposed throughout Luzon and other areas in mid-March, and the Taal Volcano eruption in January.
In expenditure terms, household and government consumption grew marginally but capital formation and trading activities plunged, the statistics body said, citing GDP data that used 2018 prices as reference.
Moreover, income earned by non-resident Filipino nationals dropped by 4.4. percent, which led to a 0.6 percent decline in gross national income, a different measure of the economy that takes into account income earned by Filipino individuals and businesses in and out of the country.
Karl Chua, acting socioeconomic planning secretary, was still optimistic despite the possibility of a recession, or two consecutive quarters of decline in GDP, with much of the economy still grounded to a halt through May.
“Our country has faced significant socioeconomic risks and shocks during the first quarter of 2020, all totally unexpected: the Taal volcano eruption in January; a significant decline in tourism and trade starting in February due to the COVID-19 pandemic; and the need to implement the enhanced community quarantine (ECQ) in Luzon and other parts of the country starting March,” he said in a statement.
“Despite these challenges, we are still well positioned to recover strongly because of our country’s solid macroeconomic and fiscal management,” he added, citing tax reforms and socioeconomic legislation.
But Chua noted that the global economy was headed for the worst recession since the Great Depression in the 1930s — with world GDP expected to drop 3 percent in 2020 according to estimates by the International Monetary Fund.
He said reviving the economy would require “stimulating domestic demand or consumption,” adding that demand would increase only if “people feel safe and are confident that health care system is working for them.”
The government will also re-prioritize “Build, Build, Build” projects, he said.
Malacañang was more optimistic than Chua, with Palace spokesman Harry Roque noting that the decline was a mere 0.2 percent despite the lockdown.
“We expect the economy to contract even more in April, but economic managers are vigilant,” he said.
Mike Ricafort, chief economist at Rizal Commercial Banking Corp., said forecasts needed to be revisited, noting that some estimates allowed for some growth in the first quarter.
“We may now see a full-year contraction of a range of between -2 percent to -4 percent. But these estimates would be fluid as economic output will remain a function of how long will this lockdown last,” he told the ABS-CBN News Channel.
Ateneo de Manila economist Alvin Ang tweeted: “Certainly we will be in a technical recession come 2Q20. It is unlikely that there will be growth in 3Q20. We are possibly in a full-year recession.” (PressONE.ph)
Source of preview image: Philippine Statistics Authority infographic