National Economic and Development Authority
Acting Secretary Karl Kendrick Chua
First Quarter 2020 National Accounts Press Conference Speech
May 7, 2020
To our colleagues from the Philippine Statistics Authority, fellow workers in government, friends from the media, and fellow Filipinos, good morning to all of you.
Our country has faced significant socio-economic 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.
Containing the spread of the virus and saving hundreds of thousands of lives through the imposition of the ECQ has come at great cost to the Philippine economy. Our economic growth is showing weaker performance compared to the past two decades. Even so, our priorities are clear: to protect lives and health of our people.
COVID-19 has certainly posed serious challenges to the country’s strong growth and development prospects. Facing unprecedented challenges, the Philippine economy, not surprisingly, contracted by 0.2 percent in the first quarter of 2020, compared to the 5.7 percent growth during the same period last year. This is the first time real GDP growth fell into negative territory since 1998 during the combined El Niño and Asian Financial Crisis.
On the demand side, household consumption significantly slowed down by 0.2 percent as almost all items posted weaker growth. An exception was household spending on health, which grew by 11.5 percent, faster than the 6.9 percent in Q4 2019.
Meanwhile, government spending grew by 7.1 percent, reflecting the government’s commitment to implement its programs. Though slower than the 17 percent in Q4 2019 when the national government executed its catch-up spending for 2019, this is still higher than the 6.4 percent growth in government expenditure in the same period last year.
On the supply side, all major sectors of the economy posted weaker growth as only those that provide essential goods and services were allowed to operate during the ECQ. Growth in the Services sector significantly moderated to 1.4 percent. Industry sector growth also declined by 3.0 percent, with the drop in manufacturing and construction and the sustained decline in mining and quarrying. The agriculture, fishery and forestry sector contracted by 0.4 percent primarily on account of lower production of palay and fishing and aquaculture.
According to the April 2020 World Economic Outlook of the International Monetary Fund or the IMF, the global economy is projected to contract by 3 percent this year and could beat the 1.7 percent drop in GDP recorded a year after the 2008 global financial crisis. Where we are now could potentially be the worst global recession since the great depression of the 1930s.
We are aware of the many sacrifices we all had to make with the imposition of the ECQ. We are very thankful to those who have tirelessly worked with us in finding solutions, in sacrificing a lot as front-liners in hospitals, in bringing relief goods and subsidies to the people, and even those who stayed at home to keep the virus from spreading. Our surveys show that while two-thirds of businesses did not operate during the ECQ, only about 20 percent of these laid off their workers. We also know that about 45 percent of non-government and self-employed workers lost their sources of income. The government stands ready to help them through our various social amelioration and wage subsidy programs.
The non-health workers at the frontlines sacrifice every day, some having to walk long distances, to make sure that the rest of us could still buy our food, medicines, groceries and other essential items. LGUs have stepped up with innovations to overcome challenges of enforcing the ECQ and responding to medical needs. Some businesses have repurposed their production to produce the much-needed Personal Protective Equipment or PPEs. The church has opened its doors to house health care workers and other front-liners. The academe and those in the technology industry have helped government by providing technological and ICT solutions to address a number of issues related to our COVID19 response. And especially, our health care workers have been selfless in sacrificing their very lives just to care for the sick, even the suspected and probable cases, those in quarantine, and the non-COVID patients.
Our combined sacrifice has resulted in a lower number of deaths and we intend to keep it low. For this reason, we continue to enjoin everyone to exert every effort to minimize the transmission of the virus so as not the squander our initial gains. We need to continue to practice social distancing, proper personal hygiene and health etiquette, and frequent sanitation and disinfection protocols at all times and at all places.
All these sacrifices have been key to buying us more time to increase our health system capacity, lower the risk of infection, and save hundreds of thousands of lives, including possibly our own family members and friends.
We have increased our testing capacity to 22 testing laboratories. We hope to do more. We are also setting up four mega swabbing centers to complement the target of conducting 30,000 tests a day by the end of May. We have procured several test kits from abroad, some have been donated; other countries and development partners have assisted us with more; and we now have locally manufactured test kits and PPEs. We also have several quarantine facilities across the country; we have also added and will continue to add COVID-19 treatment facilities.
Even before the imposition of the ECQ, government has put together a package of assistance to ensure that every family would have food on their table. We thank very much the many contributions of the business sector and civil society. In the coming weeks, the economic team and our legislators will work out an economic recovery program that will gradually get people back to work, get businesses to normalize, and get our country back on track to achieve our pre-crisis growth and job potential. In this new normal that we are facing, structural reforms are needed to improve our resiliency and help us prepare for similar challenges in the future.
Stimulating our economy needs to begin with stimulating domestic demand or consumption. Demand will only increase if people feel safe and are confident that health care system is working for them. Stimulating domestic demand can begin with ensuring that agricultural production, food manufacturing, and the entire value-chain – including logistics from the farm to the table – are able to operate at the highest possible capacity within the parameters that will protect the health and well-being of both producers and consumers.
Despite these challenges, we are still well positioned to recover strongly because of our country’s solid macroeconomic and fiscal management. The recent legislation of crucial economic and tax reforms such as the Tax Reform for Acceleration and Inclusion or TRAIN Law, the Sin Tax Laws of 2019 and 2020, the Rice Tariffication Law, the Universal Health Care Law, and the Ease of Doing Business Law have all helped us prepare for any crisis.
We continue to enjoy low and stable inflation, particularly after the passage of the Rice Tariffication Act. In 2018 and 2019, we recorded the lowest poverty rate, unemployment rate, and underemployment rate in many decades, thanks in the large part to our “Build Build Build” Program.
Our government also maintained a strong fiscal position, with a 2019 revenue-to-GDP ratio of 16.1 percent of GDP, the highest since 1997, and a national government debt-to-GDP ratio of 39.6 percent, the lowest since 1986, given the available data. We received our highest-ever credit rating of BBB+, one notch below the A-rating category.
Just recently, The Economist magazine ranked the Philippines sixth among selected emerging economies in the world, and the best among those ranked from Southeast Asia, in terms of financial strength. This shows that the country has gained and continues to enjoy the confidence of the international community, which puts us in a position to finance our COVID-19 response measures sustainably to fight the virus, protect families and workers, and prepare for our recovery program.
We remain committed to getting our ‘Build, Build, Build’ program back on track. We have proven over the past few years that we can actually implement infrastructure projects at an accelerated pace and create millions of jobs while reducing the cost of logistics, especially for micro, small, and medium enterprises. Even as we ramp up implementation of our infrastructure projects, we are very much aware of the health risks. Thus, we will have to reprioritize projects and will be putting in place stringent health and safety measures.
This COVID-19 crisis has impressed upon us the need to transition to a digital economy. Our digital infrastructure needs to be improved; the digital divide needs to be addressed. A number of structural reforms are also needed and be put in place. Before the COVID-19 crisis, we were on track to becoming an upper-middle income country this year. If we can quickly transition to the new normal, we can aspire for so much more.
These are extraordinarily trying times and the road ahead of us continues to be challenging and uncertain. Bear in mind that this crisis, like others before it, shall also pass, especially because we are working together as a nation.
All these give us hope that the Filipino nation can rise above this temporary setback, and the Philippine economy can end the year with a respectable performance.
As we recover, our socioeconomic policies will have to be adaptive and responsive to evolving realities. Rest assured that the economic team will continue to work hard to restore our confidence, our growth trajectory, and enable each and every Filipino to attain these aspirations: matatag, maginhawa at panatag na buhay.
Thank you very much and please always take care.