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Recession

"Before this, the Philippines has had 84 consecutive quarters of economic expansion—the longest and richest in our country’s history."


The Philippine economy is now in recession. Recession is a slowdown or decline in economic production for two consecutive quarters.

The economy contracted by 0.2 in the first quarter 2020 and is estimated to contract by another 5.7 to 6.7 percent in the second quarter ending June 30, 2020. For the whole year 2020, the contraction could be between 3 percent (government forecast) and 6 percent (economist Ciel Habito’s forecast). To me, I think the drop in output could be as deep as 8 percent in 2020.

The last time the country suffered a GDP growth rate decline was in early 1998, 21 years ago. After that 1998 semi-recession, the Philippines has had 84 consecutive quarters of economic expansion, the longest and richest in our country’s history. That boom brought Filipinos to low middle class status, with per capita income of $3,765.

Filipinos were supposed to be upgraded to upper middle income this 2020, with each Filipino making close to $4,000 per year. With the country enjoying among the world’s most robust growth rates, the Philippines was recording among the lowest rates in unemployment, underemployment, and poverty in recent memory. Then, the coronavirus struck.

The milestones would have made Rodrigo Duterte the best president in terms of economic achievement. No wonder, the President was surfing waves after waves of popularity surges, hitting unheard of territory, with eight in every 10 Filipinos giving him the thumbs up.

Why not? His economic managers promised to lift six million Filipinos out of poverty in 2022, at the end of his six-year term. They did it four years early, in 2018 when poverty incidence fell from 23 percent of the population in 2015 to 17 percent by 2018.

It is not as if there was a dramatic increase in real income by the poor. Poverty reduction also benefited from the “redefinition” of poverty.

Statisticians said anybody who drinks beer and smokes cannot be counted as poor, although beer and smoking are staple habits of most Filipinos. Also, statisticians redefined what it means to have a “full time” job. He is anyone who has worked for one hour in the past week. They also redefined what is a labor force. Anyone who is 15 and above who is supposed to work but is not seeking work is not counted as part of the workforce. This definition removes easily 20 million from the workforce, making the universe on which to base unemployment and underemployment ratios much smaller, about 43 million. Based on 43 million, a 5 percent unemployment is just 2.15 million. Based on 63 million, a 5 percent unemployment is 3.15 million, a difference of one million jobless Filipinos.

In the 1970s, statisticians decided that anybody using cosmetics and wearing some fancy jewelry could not be poor. That “improved” the lot of the poor, statistically.

Duterte’s economic managers also claimed that they saved more than 100,000 lives and millions more of possibly infected Filipinos, thanks to Manila’s early lockdown, on March 15, which became the world’s longest lockdown and Asia’s strictest lockdown. I was initially cynical of those claims, made by Finance Secretary Sonny Dominguez and his fair-haired freshly minted economic planning secretary, Karl Kendrick Chua.

Then, by design or negligence or both, Health Secretary Francisco Duque started trying to prove Sonny and Karl were right. The number of COVID-19 cases rose stratospherically to total 36,438 as of yesterday, with 983 new cases per day. On March 15, the day the lockdown began, there were only 140 cases, with 29 new cases per day. Cumulative deaths were 1,255 as of June 29, up from just the 12 total on March 15, 2020. Ever heard of the term “predictive” text in texting or writing? Well, it also applies to COVID reporting.

Bangko Sentral Governor Ben Diokno sent me the following press statement yesterday on the latest economic performance and outlook:

S&P’s forecast that the Philippine economy might contract by 3 percent should be seen in a positive light. This is better than the International Monetary Fund’s -3.6 percent and the Asian Development Bank’s -3.8 percent. 

The negative impact of the COVID-19 crisis is harsher than what was originally thought. In fact, the IMF has recently downgraded global growth to -4.9 percent, down from  1.9 percent points from its April forecast. 

The S&P forecast for the Philippines falls within the government’s revised projection that the domestic economy will contract at between 2 to 3.4 percent. It is also consistent with the BSP staff’s forecast that Q2 2020 GDP growth would contract at between 5.7 percent to 6.7 percent. 

The S&P’s GDP forecast for the Philippines is right in the middle of growth forecasts for ASEAN-5 countries: Indonesia, 0.7 percent; Vietnam, 1.2 percent; Philippines, -3 percent; Singapore, -5 percent; and Thailand, -5.1 percent. 

The other good news is that the rating agency sees a strong rebound for the Philippine economy next year, as it forecasts that the economy will bounce back by 9.4 percent as economic activities resume.

biznewsasia@gmail.com

Topics: Philippine economy , recession , GDP , Rodrigo Duterte , coronavirus pandemic
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