Virus-Hit Philippine Economy Stays in Recession As GDP Contracts by 4.2% in Q1

Results don't include yet the 2021 ECQ.

The Philippine economy contracted at a slower pace in the quarter ended March, staying in a recession that could deepen in the next three months, as April heralded a fresh lockdown in Metro Manila and surrounding provinces.

Gross domestic product shrank by 4.2 percent in the first quarter, from 8.3 percent in the preceding quarter. This compared to the median forecast of a 3.2 percent contraction in a Bloomberg poll of economists that also gave a 1.3 percent to 4 percent range.

How is the economy based on the numbers?

Better than the fourth quarter at -4.2 percent versus -8.3 percent. However, economists expected better numbers (most predicted -3.2 percent). Socioeconomic Planning Secretary Karl Kendrick Chua said this showed the "limits" of the recovery with quarantines still in place.

All sectors, including construction and services, posted slimmer declines or returned to growth in the first quarter. However, agriculture declined reflecting the hit of the African Swine Fever on pork supply.

What will a prolonged recession mean for you?

For one, a weak economy puts pressure on the Bangko Sentral to keep borrowing costs at record lows, meaning lower interest rates on your mortgage and credit card debt, analysts said. A shrinking economy also indicates that many businesses are not producing as much as when growth as booming, forcing some to cut costs.

What lies ahead?

Chua said the 2021 ECQ and MECQ posed "downside risks" to second quarter growth. This could be reversed through a calibrated and safe reopening of the economy.

"We will not backpedal," Chua said, adding the Philippines would capitalize on its strong growth position before the pandemic.


What about the rest of the world?

The Philippines -4.2 percent in the first quarter compared to a return to positive growth in other emerging economies -- 18.3 percent in China and  4.5 percent in Vietnam, National Statistician Claire Dennis Mapa said, citing official data. Indonesia's economy posted -0.7 percent, a contraction like the Philippines.

Mapa cited forecasts of -2.6 percent for Malaysia and -3.5 percent for Thailand. Quarter-on-quarter, however, the Philippine economy grew 0.3 percent compared to -0.9 percent in Indonesia.

At the start of April, Metro Manila, which accounts for one-third of the economy, was placed under the strictest quarantine, ECQ, alongside Laguna, Cavite, Rizal and Bulacan to arrest a surge in COVID-19 cases. It lasted two weeks and was downgraded one notch to MECQ, due to last until May 14.

Socioeconomic Planning Sec. Karl Kendrick Chua had called for a downgrade of the MECQ in the so-called NCR Plus Bubble to put the recovery back on track. 

Jobs data released earlier showed 2.2 million net jobs were restored during the first quarter. The gains will likely be reversed temporarily in the quarter ended June because of the ECQ and MECQ, President Rodrigo Duterte's economic managers said.

The ECQ and MECQ in 2021 were less strict compared to how the restrictions were implemented the year before. More people were allowed to work and limited public transport is allowed. 

This story originally appeared on Minor edits have been made by editors.

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