Green shoots are beginning to emerge despite the lingering risks posed by the COVID-19 pandemic to the global economy and people’s health.
The sustained strength of the manufacturing sector, manageable inflation and unemployment rate, stable banking system, continued investors’ confidence and resilient remittances from overseas Filipino workers are some of the positive indicators that economic managers are trying to highlight in their reports.
The gross domestic product began to rebound in the second quarter this year, when it expanded 11.8 percent, although Bangko Sentral ng Pilipinas Governor Benjamin Diokno said he saw green shoots of economic recovery “as early as the third quarter last year.”
Manufacturing and exports
Latest data from the Philippine Statistics Authority showed that the manufacturing sector posted a three-digit rate of increase both in terms of volume and value in August.
The volume of production index grew 534.6 percent, after dropping -82.2 percent at the height of strictest lockdowns in August last year. The value of production index also showed an annual increment of 523.3 percent in August.
The proportion of establishments that operated at full capacity (90 percent to 100 percent) was 22.2 percent of the total number of responding establishments. Meanwhile, 36.6 percent operated at 70 to 89 percent capacity, while 41.2 percent operated below 70-percent capacity.
Meanwhile, merchandise imports jumped 30.8 percent in August to $10.04 billion from a year ago, and exports increased 17.6 percent to $6.47 billion.
The growth in imports reflected improved supply and demand conditions as the economy gradually recovered from the COVID-induced recession last year.
Data showed that from January to August, imports reached $74.18 billion, up by 31.1 percent from $56.59 billion in the same period last year. Export earnings in the first eight months reached $48.93 billion, up by 19.6 percent from a year ago.
If not for the stricter quarantines imposed in August in Metro Manila and adjacent provinces to contain the spread of the more virulent Delta variant, unemployment rate could have been lower in the same month.
Unemployment rate in August increased to a four-month high of 8.1 percent from 6.9 percent in July. The unemployment rate in August was still lower than those reported in January, February and April this year but was higher than the rates in March 2021 (7.1 percent) May and June 2021 (7.7 percent), and in July 2021 (6.9 percent).
The total number of unemployed persons in August was estimated at 3.88 million individuals 15 years old and over.
Economic managers said in a joint statement that the increase in jobless rate in August was expected, “given the stricter quarantine imposed to curb the spread of the delta variant.”
ING Bank Manila senior economist Nicholas Mapa said the September labor market figures should look relatively similar to the August figures with a slight improvement.
“We could see unemployment dip while underemployment will likely rise with mobility curbs and the overall downbeat economic outlook capping labor hours and wages,” Mapa said.
Inflation in September slightly eased to 4.8 percent from 4.9 percent in August, on lower annual increases in transport and food prices. The latest print was contrary to projections of some analysts that the annual increases in consumer prices for the month might breach the 5-percent level.
But the September inflation was still faster than 2.3 percent a year ago. This brought the average inflation from January to September to 4.5 percent, above the target range of 2 percent to 4 percent for the year.
Food inflation decreased to 6.5 percent in September from 6.9 percent in August, on slower inflation rates in rice, fish and meat. Rice inflation recorded zero growth, following the issuance of Executive Order No. 135. Likewise, fish inflation decelerated to 10.2 percent from 12.4 percent.
In an online media briefing, BSP Department of Economic Research managing director Zeno Ronald Abenoja said inflation was expected to return within the target range in the last two months of the year after posting higher numbers in the previous months.
Stable banking system
Local banks remain stable amid the COVID-19 crisis and in a strong position to service the financing requirements of the recovering economy, Diokno said in an online briefing.
The positive performance of the Philippine banking system is evidenced by sustained growth in its assets, deposits and capital as well as ample capital and liquidity buffers and loan loss reserves, said Diokno.
Based on end-July 2021 preliminary data, banks’ total assets grew by 5.4 percent year-on-year to P19.8 trillion. Bank assets were primarily in the form of loans (52.6 percent) and portfolio investments (26.6 percent). Funding was sourced largely from deposits, which grew by 7.2 percent to P15.4 trillion, indicating the public’s continued trust and confidence in the banking system.
As of end-July 2021, total loans declined by a slower rate of 0.4 percent year-on-year to P10.8 trillion as of end-July 2021 compared to the 5.0 percent decline a year ago.
“Credit activity is expected to improve in the coming months amid the accommodative policy stance of the BSP, the national government’s accelerated vaccination program, as well as implementation of safety measures and granular lockdowns in the National Capital Region,” Diokno said.
Net inflows of foreign direct investments jumped 52 percent in July to $1.3 billion from $831 million a year ago, as the country remained attractive to investors despite the health crisis.
This brought the cumulative FDI net inflows in the first seven months to $5.6 billion, up by 43.1 percent from $3.9-billion net inflow in the first seven months of 2020. This was mainly on account of the 78.7-percent expansion in non-residents’ net investments in debt instruments to $3.9 billion from $2.2 billion.
Likewise, reinvestment of earnings reached $677 million, 19.3 percent higher than the $567 million recorded a year ago.
The target of a 6-percent growth in remittances this year from a 0.8-percent decline last year slowly materializes, based on the latest data from the Bangko Sentral ng Pilipinas.
Data showed that money sent home by Filipinos working abroad rose 5.1 percent in August to $2.609 billion from $2.483 billion a year ago, as global economies reopened and gradually recovered from the impact of the pandemic.
Remittances from land-based workers and sea-based workers went up by 4.1 percent to $2.032 billion from $1.952 billion, and 8.6 percent to $577 million from $531 million, respectively.
This brought cash remittances in the first eight months to $20.38 billion, 5.7 percent higher than the year-ago level of $19.285 billion.
Last year, cash remittances slightly declined by 0.8 percent to $29.903 billion from the record $30.133 billion in 2019 because of the pandemic. This was better than the earlier forecast of a 20-percent contraction by some analysts at the start of the virus outbreak.
This year, the BSP expects cash remittances to grow by 6 percent on improving global economic outlook.