The Philippine economy continued to contract in the third quarter of the year but at a slower pace compared to the steep decline in the second quarter, the Philippine Statistics Authority (PSA) reported on Tuesday.
The country’s gross domestic product (GDP) shrank by 11.5 percent, an improvement from the -16.9 percent contraction in the second quarter of the year, but a reversal from the 6.0 percent recorded in the third quarter of 2019.
The third quarter decline also exceeded the -7.1 to -11.4 percent projection of economists earlier polled by The Manila Times.
Net Primary Income (NPI) from the Rest of the World and gross national income (GNI) both decline by 28.2 percent and 13 percent, respectively.
The agriculture sector grew by 1.2 percent in the third quarter, down from the 3.0 percent in the same period last year.
Industry, however, plunged by 17.2 percent from the 5.4-percent expansion a year ago due to the decline in manufacturing and construction.
Services likewise contracted by 10.6 percent from 7.3 in 2019 due to the decline in real estate and ownership dwellings, accommodation and food service activities, wholesale and retail trade, repair of motor vehicles and motorcycles, transportation and storage, education, professional and business services, and human health and social work activities.
Household final consumption expenditure contracted by 9.3 percent while government final consumption expenditure slowed down to 5.8 percent from 8.8 percent a year ago.
National Statistician Claire Dennis Mapa in a briefing said that given the double-digit economic contraction in the third quarter, the government’s -5.5 percent GDP forecast for this year is no longer attainable.
He said that to achieve this, the economy would need to grow by at least 6.6 percent in the fourth quarter of the year.
“The double-digit contraction in the third quarter is not surprising given the return to more stringent quarantine measures in NCR (National Capital Region) and neighboring provinces, and Cebu City, which together account for around 60 percent of the Philippine economy,” the Finance Secretary Carlos Dominguez 3rd, Socioeconomic Planning Acting Secretary Karl Chua, and Budget and Management Secretary Wendel Avisado said in a joint statement.
The comprise the government’s economic team.
“In addition, the public transportation was restricted. This prevented many Filipinos from leaving their homes and reporting for work even if their industries are allowed to operate,” they added.
Chua alone, for his part, disclosed that the interagency Development Budget Coordination Committee (DBCC) would soon meet to reassess the latest numbers and see if there is a need to adjust the full-year projections.
“When the DBCC met in July to propose the projections for the budget, the range is up to, I believe, 6.6-percent contraction. As I mentioned, immediately after this, the DBCC will start to reassess where we are and we will report it as soon as we have done the reassessment, given the latest figures,” he said.
Chua expressed hope that the further reopening of the economy would have a positive impact on fourth quarter GDP, further noting that the government is capitalizing on the progress in the health system, notably, improved testing, contact racing and treatment strategy.
He admitted, however, that preliminary data showed that the four recent typhoons have led to some P38.8 billion damages, which is equivalent to 0.21 percent of the country’s GDP.
“Our GDP is almost P18 trillion. So, when we put them all together the impact on the country’s growth rate preliminarily is a reduction of around 0.055 percentage points. So, I think this is a manageable level. What is important is we fast track the recovery, so that more people will be reintegrated back after the disaster phase,” said Chua.
Congress asked to do its part
As the government ramps up efforts to help the economy recover, the economic team is hopeful that Congress will do its part to help the economy bounce back faster by passing 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.
Create will lower the corporate income tax outright from 30 percent to 25 percent as soon as it is made effective. This will be the biggest stimulus package ever for businesses, benefiting mostly micro, small, and medium enterprises (MSMEs) that comprise 99 percent of businesses and employ over 60 percent of Filipino workers.
FIST will help banks dispose of non-performing loans and assets so they can free up money and capital to extend more credit, especially to small businesses. Meanwhile, Guide will provide equity support to strategically important companies facing insolvency.
“All three bills are important elements of the recovery program to address specific needs of businesses. Finally, the 2021 budget will provide us with some of the heftiest tools necessary to rebuild our economy. The timely passage of this bill is crucial in helping attain the 6.5- to 7.5-percent GDP growth target for next year,” the economic team said.
“With an infrastructure budget amounting to P1.121 trillion, some 1.7 million jobs can be created. With its high multiplier effect, the Build, Build, Build program will play a pivotal role in our economic recovery. A delay in passage of the budget will be detrimental to our recovery. Each day of delay will result in P1.1 billion pesos not spent,” added the economic team.