PH economy grows 5.6% in 2021, above target after Q4 performance beats forecasts

Metro Manila (CNN Philippines, January 27) — The Philippine economy has left negative ground in 2021 as full-year growth hit 5.6%, following a stronger-than-expected performance in the fourth quarter amid more relaxed pandemic-related restrictions.

“The door to our economic recovery is now fully open,” said Socieconomic Planning Secretary Karl Chua, noting that annual growth exceeded the economic team’s 5-5.5% target band for the year.

The economy tanked by a record 9.6% in 2020 as the country implemented lockdowns due to the health crisis.

The above-target 2021 performance comes as gross domestic product (GDP) rose 7.7% last October to December, Philippine Statistics Authority (PSA) chief Dennis Mapa reported. This outdid the 8.3% plunge during the same period in 2020 and 6.9% growth in the third quarter — representing a 3.1% quarter-on-quarter rise on a seasonally adjusted basis.

The fourth quarter pace is also faster than the 6.25% average growth forecast of 15 analysts polled by CNN Philippines. 

All three major industries saw output expand in the fourth quarter, with the industrial sector leading the charge at 9.5% followed by services at 7.9% and agriculture at 1.4%.

Only agriculture contracted for the entire year, recording a -0.3% growth rate. Industry activities grew 8.2%, while services rose 5.3%.

In terms of expenditure, imports of goods saw the fastest increase at 17.9% in 2021. Intellectual property products, durable equipment, and exports also logged the quickest growth rates for the year.

Return to pre-pandemic level seen with looser restrictions

Chua also expressed confidence that the country’s economic performance will go back to pre-COVID level this year, especially with efforts to further relax mobility restrictions.

Nominal GDP stood at ₱19.38 trillion by the end of last year, while it reached ₱19.51 trillion in 2019 according to the PSA.

“If you look at the nominal levels, it’s almost the same. We’re just a few hundred billions short. We’re going to fully surpass it in 2022,” Chua said.

The official added the economy is on track to hitting the 7-9% growth pegged by economic managers for 2022 “so long as we fully go back to Alert Level 2 or lower by the end of this quarter.” He cited improvement in COVID-19 metrics, such as the recent decline in cases.

For instance, the National Capital Region Plus (NCR Plus) easing from Alert Level 3 to Alert Level 2 alone will allow a ₱3-billion weekly gain for the economy, according to Chua.

Veering away from community-wide lockdowns, the government last year gradually implemented the alert level system nationwide. By the end of 2021, the entire Philippines was under the second loosest Alert Level 2.

NCR eventually reverted to Alert Level 3 this month after the country detected its first local Omicron variant cases, with other areas following suit. Metro Manila is currently under the tighter status until the end of January.

“While an Omicron wave means the economy’s continued strong performance in Q4 is unlikely to be repeated this quarter, we think growth will pick up again before long,” said Capital Economics emerging Asia economist Alex Holmes on the latest figures, warning the economy will “remain in catch-up mode” this year.