The economy grew more than expected in the third quarter, the government said Tuesday, as a rebound in consumer spending overcame pandemic lockdowns and other restrictions to rein in the fast-spreading COVID-19 delta variant.
Gross domestic product (GDP) expanded 7.1 percent, the Philippine Statistics Authority (PSA) reported, better than the 4.9 percent predicted in a Bloomberg survey and following a blockbuster 12 percent rate in the previous three months.
The second-quarter reading was the best performance in more than three decades and came as the country emerged from a deep recession that saw five quarters of contraction caused by the virus.
Socioeconomic Planning Secretary Karl Chua said the third quarter growth validated the government’s approach to fighting COVID-19 with strict containment measures.
“Our strategy was correct. The results are clear,” Chua said in an online briefing. “This careful balancing between COVID-19 and non-COVID-19 needs led to the continued expansion of most sectors.”
With GDP growth reaching 4.9 percent in the first nine months, Chua said the Philippines is likely to attain the higher end of the government’s 4-5 percent target this year.
“The recovery is accelerating, and it is very likely that we will hit or even exceed the high end of our growth target for 2021,” he added.
Chua has previously said it will take the Philippines more than a decade to return to its pre-pandemic growth path.
He said the “long-run total cost of COVID and quarantine” will reach P41 trillion ($810 billion), which would be felt over the next 10 to 40 years.
More than 2.8 million people have been infected in the Philippines, with more than 44,000 deaths. But cases have fallen sharply in recent weeks — to levels last seen in February — allowing the government to reopen parts of the economy.
In an online briefing, national statistician and civil registrar general Dennis Mapa said the industry and services sectors contributed much to the third quarter expansion, growing by 7.9 percent and 8.2 percent, respectively.
Mapa said the wholesale and retail trade, repair of motor vehicles and motorcycles grew by 6.4 percent; manufacturing, 6.3 percent; and construction, 16.8 percent.
Meanwhile, agriculture, forestry, and fishing declined by 1.7 percent in the third quarter of 2021, due to bad weather during the period.
On the demand side, household final consumption expenditure (HFCE) grew by 7.1 percent in the third quarter of 2021. Other items that also recorded growths were gross capital formation, 22.0 percent; government final consumption expenditure (GFCE), 13.6 percent; exports, 9.0 percent; and imports, 13.2 percent.
Net primary income from the rest of the world declined by 52.3 percent. Meanwhile, the gross national income posted a growth of 2.8 percent during the period.
The third-quarter expansion was, however, slower compared to the revised 12-percent growth in the second quarter. This brought the year-to-date average GDP to 4.9 percent, near the upper end of the target range of 4 to 5 percent for the entire year.
Chua said the third-quarter growth was “among the highest third-quarter growths in the ASEAN and East Asian region.”
“On a seasonally adjusted quarter-on-quarter basis, the economy expanded by 3.8 percent. This indicates sustained recovery despite two weeks of the ECQ and a month of MECQ in the country’s economic centers,” Chua said in the briefing, referring to tough quarantine restrictions.
“While observing the health protocols, our people continued to work, and businesses continued to operate. At the same time, we saw the new daily infections fall from a peak of 26,000 on Sept. 11 to less than 1,800 last Nov. 4. This is due to the rapid inoculation drive from July to September, where about 19 million Filipinos were fully vaccinated,” Chua said.
Chua said the typhoon damage and African swine fever more than offset the increase in palay production, which was aided by the government’s Rice Competitiveness Enhancement Fund.
Government expenditure, meanwhile, returned to positive territory, growing 13.6 percent, and reversing its contraction in the previous quarter.
Total investments increased by 22 percent, driven by public and private construction that grew by 55.3 percent and 12.2 percent respectively. The government’s decision to allow all construction activities to resume regardless of the area’s quarantine status must be credited for this, he said.
“Our external trade grew as well. Exports grew by 9.0 percent while imports grew by 13.2 percent. The high growth of imports reflects the strong recovery of consumption and investment spending. The moderate growth of exports reflects both the global recovery as well as global logistics issues,” he said.
ING Bank Manila senior economist Nicholas Mapa said the expansion in the third quarter showed that “growth is possible even during lockdowns.”
Mapa added that faster economic growth might give the Bangko Sentral ng Pilipinas enough room to adjust the policy rate in the first half of 2022.
Chua said with adequate supply of vaccine doses, “the government is further accelerating the vaccination program over the next few weeks. With current trends, we expect to achieve Alert Level 1 by the onset of the New Year. “
Efficient public spending, he said, will enhance economic expansion. In the third quarter, national government disbursement surpassed the programmed level by 4 percent.
“Sustaining this into the fourth quarter makes achievement of our growth target certain,” he said.
He said so long as there are no unexpected new risks, like a stronger COVID-19 variant or global surge, the economy could be on track to a strong recovery.
The economy contracted by a record 9.6 percent last year due to the pandemic, the worst GDP performance since World War II.
This year, however, the government projected a 4 percent to 5 percent growth range, to be driven by the faster pace of the vaccination program that could boost consumer and business confidence.
Presidential spokesman Harry Roque said the latest GDP growth indicates the country’s economic recovery despite the imposition of stringent quarantine and health protocols from the July to September period due to the threat posed by the more transmissible Delta variant of COVID-19.
“The latest growth was recorded amid the implementation of stricter quarantine measures to fight the Delta variant,” Roque said in Filipino.
Roque said the Duterte government, especially its economic team, is optimistic about the continued recovery of the Philippine economy.
Albay Rep. Joey Sarte Salceda of Albay said the strong constructionsector growth of 23.8 percent, coupled with the strong demand for imports “indicates that there is momentum in capital formation.”
“I expect businesses to intensify their investing and expansion activities by the first quarter of 2022,” he said.
The Industry and Services groups showed robust numbers, at 7.9 percent and 8.2 percent respectively. Salceda said, “As more areas gain higher vaccination levels, I expect the jobs recovered in these sectors to consolidate. Agriculture, as expected, contracted by 1.7percent year-on-year.”
Salceda vowed to propose a greater agriculture budget for 2022, saying that “growth and value-added in the agriculture sector will be a key driver of economic recovery.”
He also voiced concern about employment figures even as he cited the need for the government to accelerate jobs and income recovery. “Very little change in employment levels has been observed from April to
September of 2021. This is despite growing vaccination rates across the board. I remind all of a basic economic principle, however, that growth is a necessary, but not sufficient, condition for socioeconomic recovery. We need jobs and income recovery.”
