JOINT STATEMENT OF THE DUTERTE ADMINISTRATION’S ECONOMIC MANAGERS
ON THE PHILIPPINE ECONOMIC PERFORMANCE
FOR THE FIRST QUARTER OF 2021:
SOCIOECONOMIC PLANNING SECRETARY KARL KENDRICK T. CHUA
FINANCE SECRETARY CARLOS G. DOMINGUEZ
BUDGET AND MANAGEMENT SECRETARY WENDEL E. AVISADO
MAY 11, 2021
Recent developments
Colleagues in government, friends from the media, fellow Filipinos, good morning.
It has been 15 months since COVID-19 hit us. Throughout this unprecedented crisis, the government’s priority has been the total health and welfare of the people.
When COVID-19 infections spiked, the government imposed the stringent quarantines like the enhanced community quarantine (ECQ) and modified ECQ (MECQ) to save lives from COVID-19 and buy time to improve our health system capacity.
On the other hand, when COVID-19 risk subsided, the government focused on the safe reopening of the economy to help the people recover their jobs and income sources to address hunger and non-COVID-19 illnesses.
In other words, our quarantine decisions have always been based on a cost-benefit analysis using both economic and health data.
Our aversion to risk for the most part of 2020 has placed the country in a long period of quarantine. This came at a huge cost to the economy and the people. In 2020, gross domestic product or GDP contracted by 9.6 percent, the lowest since 1947. Millions lost their jobs and income. This cannot go on in 2021.
As we learn to live with the virus, we have recalibrated our approach to the pandemic by managing risks instead of just imposing blanket quarantines. We will continue to be guided by the latest health and economic data in order to safely reopen the economy once this present spike has subsided.
Performance of the economy
As reported by the Philippine Statistics Authority today, the economy improved in the first quarter of 2021 with a slower contraction of 4.2 percent from an 8.3 percent decline in the fourth quarter of 2020. On a seasonally-adjusted quarter-on-quarter basis, the economy grew by 0.3 percent.
On the production side, both industry and services showed smaller contractions, reflecting the recovery, while the decline in agriculture reflects the ongoing crisis in the hog industry. Industry and services continued their gradual recovery, improving from -10.6 percent to -4.7 percent and from -8.0 percent to -4.4 percent, respectively.
Strong crop production, in particular rice, helped to improve agriculture performance from -2.5 percent in Q4 2020 to -1.2 percent in Q1 2021. However, the livestock industry saw a 23.2 percent drop as the African Swine Fever continues to hit the hog industry hard. To address this, the government has been decisive in lowering the tariff rates and increasing the minimum access volume for pork as a temporary measure to address the supply deficit and bring down the soaring prices of pork.
On the expenditure side, growth was driven by consumption in government, which increased by 16.1 percent. Public construction also significantly improved by 26.2 percent in Q1 2021, after two consecutive quarterly contractions of -27.1 percent in the third quarter of 2020 and -17.7 percent in the fourth quarter of 2020.
The recovery of infrastructure spending reflects the sector’s strong job recovery with a total of 940,000 jobs restored between pre-COVID-19 period and March of 2021. As the economy rebounds in the coming months, we expect business confidence to return, thereby giving private construction further impetus to recover.
With millions regaining their jobs and income sources, household spending improved with a smaller contraction of -4.8 percent from a decline of -7.3 percent in the previous quarter.
External demand also showed better prospects. Over the past months, merchandise exports gradually recovered and reached strong positive territory in March 2021. At the same time, the improvement of imports points to further gains in consumption and construction given their sizable import content.
The latest GDP performance is consistent with the recovery in the labor market. The relaxation of quarantine restrictions while adhering to the minimum health standards enabled millions to regain their jobs and income sources in the first quarter. As of March 2021, we surpassed pre-COVID employment by 2.8 million jobs, as the labor force participation rate improved to 65 percent and the unemployment rate fell to 7.1 percent, the lowest since the height of the pandemic. The underemployment rate also decreased from 18.2 percent in February 2021 to 16.2 percent in March 2021, reflecting the improvement in the overall quality of jobs.
Prospects for recovery and policy recommendations
In December 2020, the Development Budget Coordination Committee (DBCC) affirmed a growth projection of 6.5 to 7.5 percent for 2021. While the past seven weeks of ECQ and MECQ in the NCR Plus area will pose downside risk to growth, our actions in the next eight months can reverse these initial losses.
This growth prospect is underpinned by three important policy actions. First is the safe reopening of the economy. Second is the full implementation of the recovery package. And third is the acceleration of the vaccination program.
Safe reopening of the economy
The economic managers understand the risk posed by the present spike and agreed to impose stricter quarantines in high-risk areas while allowing large parts of the economy to continue operating.
We are working hard to use the present ECQ and MECQ period to improve our health system capacity. For instance, data from the Department of Health (DOH) shows that between March 28 and May 10, 2021, ICU beds in the country increased from 2,334 to 3,084, while total hospital beds rose from 30,602 to 33,584. In NCR, the center of the present spike, ICU beds increased from 781 to 1,262 and total beds rose from 8,847 to 9,779.
In addition, the government and the private sector are working together to improve contact tracing using automated means, such as the prompt sending of a text message or SMS to close contacts to inform them of the need to quarantine. With this, the government can bring down the gap between virus detection and isolation from 7 to 5.5 days. This would potentially reduce cases by around 51 percent, according to the epidemiological models.
The latest economic performance shows the limit of economic recovery without any major relaxation of our quarantine policy. Thus, once the present spike is over, we can implement quarantine relaxations in a phased approach to boost our recovery this year. For instance, we can move the NCR towards MGCQ, allow families and their children to participate in the economy, and restart face-to-face schooling.
Implementing the recovery program
We will complement the safe reopening of the economy with the timely and full implementation of our recovery package. Some 2.76 trillion pesos or 15.4 percent of GDP of fiscal, monetary, and financial resources have been allocated for this since last year.
Our fiscal package today includes three budgets that are being implemented together: the Bayanihan 2, the 2020 GAA, and the 2021 GAA, as well as the CREATE law that provides tax deductions to businesses of all sizes, and targeted incentives to investors. We have also optimized fiscal savings by giving some 22.9 million individuals in the NCR Plus area with 22.9 billion pesos in supplemental social amelioration program during the recent ECQ period.
We urge Congress to complete the recovery package by immediately passing the Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery or the GUIDE bill. This will assist in the rehabilitation of strategically important companies experiencing solvency issues. GUIDE will also complement the Financial Institutions Strategic Transfer Act or the FIST Act, which helps the financial sector dispose of non-performing assets and loans to enable them to serve more small businesses.
Accelerating the vaccination program
Lastly, we will accelerate the vaccination program to help boost business and consumer confidence. As of May 9, 2021, more than 2.4 million doses have been administered to our health care workers, senior citizens, and persons with comorbidities. We have also begun the inoculation of frontline workers in essential economic sectors.
We expect to cover even more individuals as 2 million doses of the AstraZeneca vaccine arrived on May 8 and 193,050 doses of the Pfizer vaccine arrived yesterday night. According to the National Task Force against COVID-19, some 13.5 million doses from various sources are expected to arrive by July 2021. All of these will help achieve the goal of inoculating 100 percent of our adult population, or some 70 million Filipinos by the end of 2021.
Conclusion
Our economy may slow down in early 2021 given recent developments, but we will not backpedal. The country’s strong economic position before the pandemic and improving economic data in recent months point to an economy that is on the mend.
This time around, we also have much more latitude. Unlike last year’s ECQ, the government is taking a more calibrated approach to the present quarantines by addressing the highest sources of risks. Most sectors of the economy, including public transport, are allowed to operate today in the present ECQ and MECQ period subject to the health protocols.
With the trend in COVID-19 cases declining in recent weeks, we can begin to relax quarantine levels and allow more people to return to work. Managing risks and safely reopening the economy are the most effective ways to address hunger and poverty brought about by this pandemic.
Everyone’s cooperation in strictly complying with the minimum health standards of wearing a face mask, washing hands, staying at home except to work and buy essential goods and services, and keeping a distance when outside homes will be crucial in averting another spike. We also encourage businesses and consumers to maximize the use of digital platforms for social and economic activities. Our resolve to work together will underpin our prospects for a strong and inclusive recovery.
Thank you and stay safe.
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