THE Philippine economy may have technically exited recession but the uncertainty caused by the Delta variant is threatening its recent economic gains, according to local economists. On Tuesday, the Philippine Statistics Authority (PSA) disclosed that GDP grew 11.8 percent in the second quarter and 3.7 percent in the first semester of the year.
However, local economists interviewed by the BusinessMirror were not quick to jump on the “recession’s over” train as uncertainties remain.
“We were able to break the streak of consecutive quarters of contraction. Recession is two consecutive quarters of negative growth rates,” Ateneo Center for Research and Development (ACERD) Associate Director Ser Percival K. Peña-Reyes told the BusinessMirror.
“It’s a different matter when you talk about levels of growth rates. We have a long way to go before we can go back to prepandemic levels,” he said.
De La Salle University economist Maria Ella Oplas said the second quarter GDP growth only meant that the economy improved from last year’s condition. This is more often known as base effect.
Oplas said recessions often last for around three years. A technical recession is marked by at least two quarters of GDP contraction but, she said, “it can fluctuate.”
This means, Oplas said, it is possible for the economy to contract for two quarters then increase in the next quarter only to go back to a contraction in the following period.
“Well, you can say it’s part of the business cycle theory where the economy experiences bouts of recession and economic growth. This is the reason for sound fiscal and monetary policy to smoothen such fluctuations and to sustain economic growth,” former Dean of the Ateneo de Manila School of Social Sciences Fernando T. Aldaba told this newspaper.
Meanwhile, BPI Chief Economist Emilio S. Neri Jr. told BusinessMirror that the combined GDP of the last quarter was still 12 percent behind 2019 levels.
The PSA also estimated that the P8.9-trillion GDP in the first half of 2021 was 6 percent lower than the P9.4 trillion recorded in the first half of 2019.
UnionBank Chief Economist Ruben Carlo O. Asuncion told the BusinessMirror that it is also worth examining the seasonally adjusted growth of the Philippine economy.
Based on PSA data, the seasonally adjusted GDP growth contracted 1.3 percent. Asuncion said only if the figure is positive can economists say there was a “real robust comeback” in economic growth.
“It’s difficult to say we are no longer in a recession when [the number of] people who do not have jobs are soaring and job opportunities are lacking,” Asuncion also said.
Recovery
National Statistician Claire Dennis S. Mapa said in order for the government’s low-end target of 6 percent to be achieved this year, the economy needs to post a growth of 8.2 percent in the second half of the year.
If the high-end target of 7 percent is to be achieved, Mapa said the economy needs to grow 10.2 percent in the July-to-December period.
Prepandemic, 2023?
Aldaba said, however, that the economy is already on its way to recovery but this would not happen immediately. He estimates that going back to prepandemic levels could come later, around 2023.
Recovery from the recession, he said, could come faster if the country can improve its management of the pandemic through testing, contact tracing, and vaccination.
These efforts, Aldaba said, could be complemented by increased government spending for assistance to households and firms.
Neri said it is possible to recover in 2022 if the vaccination rate rises to 25 percent to 30 percent by year-end and 60 to 70 percent by mid-2022.
“We are not in a recession anymore but a lot of work still needs to be done. We are falling behind our Asean peers. Most of them will be back to 2019 output this year,” Neri said.
“We are one of the few who might see full recovery by 2022, even 2023. More important is what is necessary to return to our output path before the pandemic,” he added.
Asuncion said initially, UnionBank estimated that the recovery of the economy would be possible at the end of 2022. But given the uncertainties and the impending lockdown, recovery may be pushed back to the first quarter of 2023.
However, Action for Economic Reforms (AER) Coordination Filomeno Sta. Ana III said it was difficult to estimate when the economy will see a recovery given the uncertainties brought by the Delta variant.
He said the pandemic caused a lot of strain and unpredictability. It was also important to consider other variables such as income, employment, and investments. These would be crucial in ushering in a recovery from the recession.
“Of course the double-digit quarterly growth is impressive; it is near the higher bound of what is possible for growth during the said time period. But looking ahead, we have to contain the Delta variant, if the spurt could be sustained,” Sta. Ana said.
GDP as P100
In a public social-media post, Peña-Reyes likened the second quarter GDP in 2019 to P100. In the second quarter of 2020, this declined 16.9 percent or a reduction of P16.9 to P83.10.
However, in the second quarter of 2021, GDP grew 11.8 percent to P92.91. There is a difference of P9.81 between second quarter GDP in 2019 and 2020.
Comparing the difference between GDP in 2020 and 2021 and the decline in GDP growth in 2020, Peña-Reyes said the economy only recovered 58.02 percent of the P16.9 billion that the economy lost in the 2020.
“So, where did ACERD’s 15.2 percent forecast come from? Simply put, we were assuming that in Q2-2021, we were able to recover about 75 percent of what we lost in Q2-2020,” Peña-Reyes said.
“If we lost P16.90, then 75 percent of P16.90 is P12.68. P12.68/P83.10 = 15.26 percent, which was pretty much our forecast. It turns out that we were being exceedingly generous with our assumption,” he added.
Returning to prepandemic levels using this analogy, Peña-Reyes said, would mean growing the 7.63 percent to go back to the P100 level in the second quarter of 2019.
“I will just leave it to your imagination if such a feat is doable in a year,” Peña-Reyes said.
No fluke?
Economists believe, however, that the second quarter growth was not a fluke, given that base effects and the policies of the government did help boost economic growth in the period.
Former ACERD Director Ang thinks the second quarter growth was no fluke since the economic team was correct in saying that this was a result of looser mobility restrictions.
Socioeconomic Planning Secretary Karl Kendrick T. Chua said the President’s economic team attributed the recovery to the government’s policy to ease mobility restrictions in production sectors, such as construction, during the enhanced community quarantine (ECQ) period last March and April.
Public construction, Chua said, grew 49.7 percent while private construction expanded by 19.1 percent. Together, the construction sector grew 25.7 percent, the highest since the second quarter of 2010, when its expansion reached 26.6 percent.
Chua added that household spending grew 7.2 percent as millions regained their jobs and income sources in the first half.
He also said foreign trade substantially recovered with imports and exports rising by 37.8 percent and 27 percent, respectively. This, Chua said, is a strong rebound that reflected increased domestic demand and the recovery of the country’s trading partners.
Neri added that the economy would have done better had it not been for the surge in Covid-19 cases in March and April. This, he said, dampened the economy’s “recovery momentum.”
Sta. Ana agreed and said that it was worth noting that Filipinos have also learned their lessons on how to “dance with the virus” as well as the cost of the “premature easing of restrictions.” He added the government also avoided an absolute lockdown.
“Luck nevertheless plays a role. What we can say is that growth for said quarter reached the higher bound,” Sta. Ana said.
The PSA said the main contributors to the growth were: Manufacturing which rose by 22.3 percent; Construction, 25.7 percent; and Wholesale and retail trade; repair of motor vehicles and motorcycles, 5.4 percent.
Among the major economic sectors, Industry and Services posted increases of 20.8 percent and 9.6 percent, respectively.
Meanwhile, Agriculture, forestry, and fishing contracted by -0.1 percent in the second quarter.