The country plunged into recession after its biggest quarterly contraction on record of 16.5 percent, data showed Thursday, as the economy reels from coronavirus lockdowns that have wrecked businesses and thrown millions out of work.
Growth, measured in gross domestic product (GDP), registered a sharper drop than expected that made the country join Thailand and Singapore as the only countries in the region to enter an economic slump after two consecutive quarters of contraction.
“On a seasonally-adjusted basis, growth rate of GDP posted a quarter-on-quarter decline of 15.2 percent in the second quarter of 2020,” the PSA said.
The GDP retreat followed a revised 0.7 percent contraction in the first three months and marked the biggest reduction in economic activity since records began in 1981 under the late Presiddent Ferdinand Marcos. It is the country’s first recession in three decades.
In the production side, accommodation and food service activities dropped by 68 percent followed by other services with -63 percent, transportation and storage with -59.2 percent and construction with -33.5 percent.
Compared to its regional peers, the Philippines entered into a recession along with Singapore and Thailand, the latter two of which, declined by 0.3 percent and 1.8 percent, respectively.
The Development Budget Coordination Committee announced a revision in its GDP estimate for the year, making a downward adjustment to minus 5.5 percent from the previous minus 2 percent to minus 3.4 percent range.
Acting Socioeconomic Planning Secretary Karl Kendrick Chua said that the second quarter absorbed the full impact of the imposed enhanced community quarantine (ECQ) which closed at least 70 percent of the economy.
“A month of lockdown in the second quarter because of the ECQ affected us by almost P1.5 trillion,” Chua said.
According to him, the decision to place the large part of the economy under ECQ is worth the lives saved as such prevented an estimated 1.3 to 1.5 million cases.
“More importantly, some 59,000 to 171,000 lives were saved. However, this has come at a great cost to the economy as the ECQ shut down around 75 percent of the economy,” he explained.
Tough balancing act
The Cabinet official then cited the government’s response to the pandemic, which was likened to a balancing act as imposing lockdowns to prevent the spread of virus will cripple businesses while an easing could trigger a spike in cases.
“We are not only concerned about the immediate GDP or economic activity. We have to balance that with the near-term GDP. In other words, we will have to be dancing with the virus. When the virus escalates or surge, we will have to respond appropriately,” Chua said.
Diokno: Worst behind us
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno expressed his optimism that “the worst is behind us” already following the sharp drop in the second quarter GDP, which was believed to be the deepest contraction for the year.
However, the risk of the virus still remains, hence, the need to act appropriately to finally defeat the virus.
“I believe the worst is behind us. But we’re not out of the woods yet. The second quarter GDP numbers were largely due to the comprehensive lockdown during the quarter,” Diokno said.