November 10, 2020
The Philippines can return to a solid growth and development trajectory if we enable the economy to recover by efficiently managing risks, the National Economic and Development Authority (NEDA) said.
In a joint statement of the economic managers during the press conference on the performance of the Philippine economy for the third quarter of 2020, Acting Socioeconomic Planning Secretary, Karl Kendrick Chua affirmed the positive outlook for the country.
“Our experience with COVID-19 over the past several months tells us two things. First, the economy is strong enough to recover, if we enable it to do so. Second, our best recourse to help the economy is to manage risks. Managing risks, instead of totally avoiding them, will allow us to safely open more of the economy and help Filipinos recover their sources of income. This will also put the Philippines back on its solid growth and development trajectory,” Chua said.
“The smaller GDP contraction of 11.5 percent in the third quarter from a contraction of 16.9 percent in the second quarter indicates that the Philippine economy is on the mend. The path is clearer to a strong bounce-back in 2021,” the NEDA chief added.
Chua also pointed out that the still double-digit contraction in the third quarter did not come as a surprise given the return of stringent quarantine measures in NCR, adjacent provinces, and Cebu City, which account for around 60 percent of the Philippine economy.
He also said restrictions in public transportation prevented many workers from leaving their homes and reporting for work even if their industries are allowed to operate.
“For instance, in September, some 58 percent of workers were allowed to resume work in NCR. However, public transportation at that time could only accommodate 36 percent because of social distancing rules and lower operator turnout. This means that some 22.7 percent of NCR workers could not go to work,” added Chua.
While there are firms and businesses utilizing digital technologies to continue operations, a recent survey on the impact of COVID-19 on firms shows that 70 percent of firms participating in the survey only had 2 percent of their workforce on a home-based arrangement, with the unsuitability of work to such set-up as the main reason.
Nonetheless, the economy has begun to recover. On a quarter-on-quarter basis, the economy grew by 8 percent in the third quarter, reflecting the return of economic activities as the quarantine was eased.
On the expenditure side, smaller contractions were recorded in household consumption, firm investment, exports, and imports. This signals that households and firms are recovering. In particular, goods exports grew by positive 2.2 percent in September, as the economy of the country’s major trading partners in the region bounced back, notably China.
On the supply side, agriculture growth slowed to 1.2 percent, as the sector faced a number of plant and animal diseases. These headwinds, however, had minimal effects on overall food supply as evidenced by falling food inflation in the same period.
Both industry and services also showed a smaller contraction, consistent with the initial recovery of employment, where some 7.5 million workers returned in the third quarter. This reduced the unemployment rate to 10 percent in July from 17.7 percent in April, when the quarantine was at its strictest.
The Cabinet has recently approved measures to further open up the economy in the fourth quarter, subject to enforcing the minimum health standards and enhancing the PDITR (Prevent, Detect, Isolate, Treat, Reintegrate) strategy.
The Department of Trade and Industry (DTI) and the Department of Transportation (DOTR), respectively, have also issued guidelines to allow more sectors to expand capacity to between 75 and 100 percent and to increase public transport capacity using a combination of faster turnaround, service contracting, and following the “seven commandments” for safe public transportation.
As the government pursues efforts to avoid virus surges while easing restrictions on businesses and transportation, Chua also expressed that the economic team is hopeful that Congress will do its part to help the economy bounce back faster by passing the pending recovery bills within the year. These are the 2021 General Appropriations Act (GAA), the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, the Government Financial Institutions Unified Initiative to Distressed Enterprises for Economic Recovery (GUIDE) Act, and the Financial Institutions Strategic Transfer (FIST) Act.
Chua also added that in the fourth quarter, the full release and utilization of Bayanihan 2 is crucial to improving 2020 GDP prospects, while the 2021 General Appropriations Act will provide the country with some of the heftiest tools necessary to rebuild the economy.
“The timely passage of the 2021 budget is crucial in helping attain the 6.5 to 7.5 percent growth target for next year,” he said.
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