NEDA’s Chua hopes for a V-shape recovery by June

The Philippine economy is well-positioned to recover from the contraction it experienced due to the COVID-19 pandemic with the right policies in place, the country’s top economist said Thursday.

“We will use our policies proactively to ensure we gradually normalize. We are hoping with the mega swabbing, the 30,000 tests per day, we can start to reverse the economic trajectory by June so that by the second half of the year we can fully recover,” National Economic and Development Authority (NEDA) Acting Secretary Karl Chua said in a virtual press briefing.

“The idea is we use our policies and our collective effort to proactively shape our future into a recovery that looks more like a V-shape so by the end of the end of the year, we will have respectable growth performance,” Chua said.

The Philippine economy contracted by 0.2% in the first quarter of 2020, the first contraction in gross domestic product since 1998.

Among the factors cited by Chua are the eruption of the Taal volcano in January, the decline in tourism and trade due to the coronavirus disease 2019 (COVID-19) pandemic in February, and the enhanced community quarantine (ECQ) in March.

Metro Manila, along with several "high-risk" areas, has been on lockdown since March 17, with the enhanced community quarantine in the area extended twice until May 15.

The NEDA chief also noted that the economy is seen to contract deeper by the second quarter of the year owing to the full-month extension of the ECQ in April.

“The good news is, as of May 1, many areas of the country have moved to GCQ... What this means is that there is a chance that we minimize the expected contraction in the second quarter," Chua said, noting that 26% of local government units have already resumed economic activities.

Sought for comment, Rizal Commercial Banking Corp. chief economist Michael Ricafort echoed that most of the economic decline could be seen by the second quarter of 2020.

“GDP growth could still continue to contract in third quarter 2020 but by a lesser extent as there could have been already some easing of the ECQ/lockdown but there could still be continued social-distancing measures as the economy could be re-opened gradually and stimulus measures and monetary policy easing measures to cushion the business/economic losses of COVID-19 would continue to have greater effects on the economy,” Ricafort said.

By the fourth quarter, the economist said that GDP could already be positive at “low single-digit levels” on the “premise that the COVID-19 could have already been better controlled/contained by then that would result in further gradual resumption of business/economic activities.”

“Stimulus measures and monetary policy measures could have also been in much greater effect by fourth quarter 2020 on the presumption that business/economic activities already picked up/rebounded further from third quarter 2020,” Ricafort said.

“The Christmas season could also fundamentally support increased business/economic activities in fourth quarter 2020,” he added.

To drive economic recovery, the government is eyeing to stimulate domestic demand or consumption by bringing back consumer and business confidence.

“Demand will only increase if people feel safe and are confident that the health care system is working for them,” Chua said.

“Stimulating domestic demand can begin with ensuring that agricultural production, food manufacturing, and the entire value-chain – including logistics from the farm to the table – are able to operate at the highest possible capacity within the parameters that will protect the health and well-being of both producers and consumers,” he said.

Despite the challenges faced amidst the pandemic, the Philippines is still well positioned to recover strongly because of the country’s solid macroeconomic and fiscal management, according to the NEDA chief.

“The recent legislation of crucial economic and tax reforms such as the Tax Reform for Acceleration and Inclusion or TRAIN Law, the Sin Tax Laws of 2019 and 2020, the Rice Tariffication Law, the Universal Health Care Law, and the Ease of Doing Business Law have all helped us prepare for any crisis,” Chua said.

“We continue to enjoy low and stable inflation, particularly after the passage of the Rice Tariffication Act. In 2018 and 2019, we recorded the lowest poverty rate, unemployment rate, and underemployment rate in many decades, thanks in large part to our “Build Build Build” Program,” he said.

Chua noted that the government also maintained a strong fiscal position, with a 2019 revenue-to-GDP ratio of 16.1% of GDP, the highest since 1997, and a national government debt-to-GDP ratio of 39.6%, the lowest since 1986, given the available data. We received our highest-ever credit rating of BBB+, one notch below the A-rating category.

The Cabinet official noted that the government remains committed to getting the “Build, Build, Build” program back on track.

“We have proven over the past few years that we can actually implement infrastructure projects at an accelerated pace and create millions of jobs while reducing the cost of logistics, especially for micro, small, and medium enterprises,” Chua said.

“Even as we ramp up implementation of our infrastructure projects, we are very much aware of the health risks. Thus, we will have to reprioritize projects and will be putting in place stringent health and safety measures,” the NEDA chief said.—AOL, GMA News