"This is the first time the GDP shrank since the last quarter of 1998."
The Philippine economy has taken a heavy beating in the first quarter of the year.
With millions of workers confined in their homes in March and the Taal Volcano eruption disrupting agricultural production in January, the economy contracted 0.2 percent in the three-month period—the first time it shrank since the last quarter of 1998.
Acting Economic Planning Secretary Karl Chua is fearing the worst. The economy could further sink in the second quarter when the Luzon-wide quarantine period is being implemented for the most part. With shuttered malls and fast-food restaurants, grounded transportation and work mostly suspended, the economy has virtually stopped in April and May.
The Philippines is basically a consumption-driven economy and the gross domestic product data showed the greatest damage on the economy. Consumer spending slowed to just 0.2 percent in the first quarter as shopping centers closed down and fast-food services significantly cut down their operations. The services sector posted a mere growth of 1.4 percent during the period.
Agriculture, forestry and fishing, and industry contracted 0.4 percent and 3.0 percent, respectively, as the transportation of goods was impaired and workers were told to stay home.
ING senior economist Nicholas Mapa correctly assessed the negative impact of the harsh quarantine measures. The current lockdown, he says, “will undoubtedly drag GDP deep into contraction as we see how destructive the enhanced community quarantine can be for the consumption-driven economy."
The Inter-Agency Task Force on Emerging Infectious Diseases should now take a more serious look on the impact of COVID-19 on the economy. It should recommend a gradual and cautious reopening of the economy now that the virus outbreak is being contained based on established statistics here and worldwide.
The government cannot sustain subsidies for long. Besides, the state cannot fund an amelioration program without tax collections. With little economic activities and a much-reduced workforce who can spend, revenue collections will be hard to come by.
