The economy remained in the doldrums in the third quarter this year, but showed a slight improvement from the previous three months as gross domestic product (GDP) contracted 11.5 percent, the Philippine Statistics Authority said Tuesday.
The decline was better than the 16.9 percent decline a quarter ago, but was a clear sign that the COVID-19 pandemic had a prolonged negative impact on the economy. The 11.5 percent contraction was worse that the government’s earlier projection of a 6.6 percent decline for the entire year.
The industries that contributed the least to the GDP were construction, -39.8 percent; real estate and ownership of dwellings, -22.5 percent; and manufacturing, -9.7 percent.
On the expenditure side, the government final consumption expenditure posted growth of 5.8 percent while household final consumption expenditure declined by -9.3 percent, along with the gross capital formation at -41.6 percent; exports, -14.7 percent; and imports, -21.7 percent.
Net Primary income from the rest of the world and the gross national income posted decreases of -28.2 percent and -13.0 percent, respectively.
Despite the double-digit contraction for July to September, economic managers–composed of Finance Secretary Carlos Dominguez III, Acting Socioeconomic Planning Secretary Karl Chua, and Budget
Secretary Wendel Avisad–said "the worst is over for the country."
"The smaller GDP contraction of 11.5 percent in the third quarter from a contraction of 16.9 percent in the second quarter indicates that the economy is on the mend. The path is clearer to a strong bounce-back in 2021," the three officials said in a joint statement.
"The double-digit contraction in the third quarter is not surprising given the return to more stringent quarantine measures in NCR and neighboring provinces, and Cebu City, which together account for around 60 percent of the Philippine economy," they said.
In addition, they said public transportation was restricted. This prevented many Filipinos from leaving their homes and reporting for work even if their industries are allowed to operate.
ING Bank Manila senior economist Nicholas Mapa said that with unemployment still elevated at 10 percent and business sentiment negative according to the Bangko Sentral ng Pilipinas, "we do not expect a quick rebound in growth with GDP remaining in negative territory until a base effect-induced bounce in 2Q 2022."
"Household consumption, which delivers the bulk of economic activity, will be handicapped in months ahead given the challenging labor market while bank lending slowed to single digit growth, signaling a parallel slowdown in investment momentum," Mapa said.
Mapa further noted the sustained elevated number of COVID-19 daily infections may increase in the coming months as authorities planto relax lockdown measures further.
"The persistent threat of the virus will like sap consumption appetite and keep investment outlays at bay," Mapa said.
The economic managers said that in the fourth quarter, the full release and utilization of Bayanihan 2 is crucial to improving 2020 GDP prospects. As of Nov.r 3, P80 billion or some 58 percent of the P140 billion in regular appropriations for Bayanihan 2 have been released.
The economic managers said the 2021 budget will provide the government with “some of the heftiest tools” necessary to rebuild the economy.
“The timely passage of this bill is crucial in helping attain the 6.5 to 7.5 percent GDP growth target for next year," they said.
They said with an infrastructure budget amounting to P1.121 trillion, some 1.7 million jobs can be created. With its high multiplier effect, they said the "Build, Build, Build" program will play a pivotal role in economic recovery.
They warned that any delay in passage of the budget would be detrimental to economic recovery. They said each day of delay will result in P1.1 billion not spent.
Malacañang expressed optimism that the economy will recover even after contracting 11.5 percent in the third quarter.
Presidential spokesman Harry Roque said the economy showed signs of recovery after improving over the 16.9 percent contraction in the previous quarter.
Roque admitted that stricter community quarantine measures greatly affected the country’s economy.
Also on Tuesday, Albay Rep. Jose Clemente Sarte Salceda said because the economy contracted more than forecast, the government must include more direct transfers to the poor in the 2021 budget.
“The fourth quarter figures will have some complications, too, because of the typhoons. Before this pandemic, Bicol was one of the fastest growing regions in the country. With one of our growth drivers diminished, we will see some of our pain continue in the fourth quarter,” Salceda added.
In a message to economic managers, Salceda said the government has to watch out for a depletion in disposable income and household savings in analyzing the country’s third quarter figures.
“If the disposable income goes down deeply, below expectations, we should be open to a direct, universal cash transfer. There should be some fiscal space left since we outperformed revised revenue targets this year. We can also borrow a bit from future revenues, provided we enact the tax proposals my committee has already passed on to the House plenary and to the Senate. We can make them effective post-2022.”