"Bad times still lie ahead."
"Bad times still lie ahead."
Of all the statistical data from the National Economic and Development Authority and Philippine Statistics Authority, none are more eagerly awaited than the data relating to the national income accounts. This is particularly true of the figures for Gross Domestic Product.
The GDP records all the productive activities of an economy during a given period. They indicate to all interested people—policymakers, analysts, researchers, investors, producers, and consumers—the extent to which the Philippine economy has grown or—in these very different economic times—contracted. They tell us the sectors that experienced growth or contraction and the sectors of the economy that have performed best or worst. They comprise a comprehensive road map of the economy’s most recent journey.
Because of their great importance to the work of makers of economic decisions, it is imperative that the preparation of the GDP figures be undertaken with the utmost competence and care. GDP figures that are way off the mark will give rise to bad decision-making across the economy. Decisions to invest, produce, and consume will be based on faulty assumptions about the strength and direction of the Philippine economy’s growth.
NEDA has a generally good record of preparation of the national income accounts. As additional data have come in, it has had to adjust initial estimates, but NEDA has been way off the mark thus far.
Late in July, NEDA released to a highly expectant nation its GDP estimates for the very problematic second quarter, when Metro Manila and Calabarzon except Quezon—the Philippine economy’s economic center—were subject to Enhanced Community Quarantine. This country’s economic planning agency estimated that the economy contracted by 16.3 percent year-on-year, bringing to 7.4 percent the contraction for the whole of 2020’s first semester. NEDA was in uncharted territory: neither it nor its predecessor, NEC (National Economic Council) has ever had to record a GDP contraction of that magnitude.
Never in its past-World War II history has the Philippine economy seen devastation of the kind that it is currently undergoing. Like a scythe, the novel coronavirus has cut down virtually everything in its path—livelihoods, small businesses, profits, prospects.
After almost six months of lockdown, the worst may be behind the economy, but bad times still lie ahead. At least the remaining quarters will very probably be contractionary periods for the economy as a whole.
Consumption, specifically, which accounts for close to two-thirds of this country’s economy, is sharply down, and production, which accounts for the remaining one-third, continues to be hampered by the public health protocols. With most of the necessary economic data, NEDA’s second quarter estimate of 16.4-percent contraction will very likely prove to be an overestimate. So, necessarily, will its 7.3 percent first-quarter estimate.