PH out of recession with 11.8% growth in Q2, meeting expectations

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Metro Manila (CNN Philippines, August 10) — The country is finally out of a pandemic-induced recession with the economy expanding in the second quarter after a record nosedive during the same period last year, latest data from the Philippine Statistics Authority revealed.

In a press briefing on Tuesday, National Statistician Dennis Mapa announced an 11.8% growth from April to June, a shift from the 3.9% plunge logged in the first three months of 2021. However, on a seasonally adjusted quarter-on-quarter basis, the economy shrank by 1.3%

The latest pace meets the expected double-digit growth by the economic team and analysts alike. A CNN Philippines poll among 14 economists yielded an average 10.03% growth projection for the quarter. 

Analysts have emphasized that the projected figure is base-driven, with the record 17% nosedive serving as an extremely low denominator for this quarter’s growth.

Only agricultural output fell among major industries compared to a year ago at -0.1%. Industry grew 20.8% compared to -21.8% in the second quarter last year, while services rose 8.6% from -17.1% in the same period in 2020.

However, compared to the first quarter, only services posted a contraction at -2.8%. The agriculture and industrial sectors expanded by 0.6% and 1.1%, respectively.

In terms of spending drivers, government expenditures declined by 4.9% year-on-year. Household consumption, which primarily steers economic activity, leaped to 7.2% in the second quarter compared to -15.3% in the same period last year.

Performance ‘more than just base effects’

During the virtual press conference, Socieconomic Planning Secretary Karl Kendrick Chua emphasized the recent figures weren’t merely due to low figures from last year.

“It is the result of a better balance between addressing COVID-19 and the need to restore jobs and incomes of the people,” added Chua, who heads the National Economic and Development Authority.

While the main economic hub Metro Manila and nearby provinces were placed under strict lockdowns at the start of the quarter, they eventually eased to general community quarantine with varying levels of restrictions by June.

Chua noted this year’s lockdown is different, with more industries and services allowed to keep operating and public transport remaining available.

“This is a clear indication that managing risks, instead of shutting down large segments of the economy, stands a far better chance of improving both economic and health outcomes,” said Chua.

Full-year growth out of reach?

However, an international think tank says the country’s shot at a strong economic rebound looks slim with the latest figures — particularly the quarter-on-quarter decline.

“That leaves GDP around 9% below its pre-crisis level and a whopping 17% behind its pre-crisis trend,” said Capital Economics senior Asia economist Alex Holmes.

With this, Holmes said the economic team’s 6-7% growth target band “now looks out of reach.”

Meanwhile, ANZ Research noted the recent numbers do not affirm an economic rebound.

“Rather, it confirms that recovery will likely be gradual and protracted. There (is) a myriad of headwinds, including high un/under employment, limited household savings and banks’ low propensity to lend,” said ANZ Research economists Bansi Madhavani and Sanjay Mathur.

Mapa said the economy needs to grow by 8.2% to meet the lower end of the government’s 2021 target band in the last half of the year, and by 10.2% to meet the higher endpoint.

Chua said the economic team is constantly reviewing full-year growth targets especially with the threat of the highly contagious Delta coronavirus variant. Metro Manila returned to a two-week enhanced community quarantine starting August 6 as local authorities aimed to quash the surge in infections.

Asked if the economy will continue this performance for the rest of the year, economist Calixto Chikiamco told CNN Philippines that it is hard to conclude given the two-week lockdown.

He also expects underemployment and unemployment to continue to rise as an effect of the restrictions.

In order to get out of the economic rut, the country needs to really contain the pandemic, increase healthcare capacity, do contact tracing and isolation "in order to improve the prospects of the economy," he said.

"As we head into the Christmas season, hopefully there will be more spending that will happen and bigger remittances that will come in. Ang susi nyan (The key here) is that the restrictions have to be loosened up," Chikiamco added.

He explained this could be the reason businessmen preferred to have lockdowns now to prevent implementing these during the Holiday season, when impact to the economy will be greater since it is expected that spending will be higher during that period.