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Philippines exits recession but recovery prospects still dim

The Philippines pulled out of recession in the second quarter of 2021, with the economy growing by a 32-year-high of 11.8% after five straight quarters in negative territory.

The latest annual growth comes after a low base of -16.9% in the second quarter of 2020 when most of the economy were shut down due to the strictest enhanced community quarantine (ECQ).  It also compares with -3.9% in the first quarter of the year. 

The reading is also the best quarterly performance in over three decades since the 12.0% growth recorded in the fourth quarter of 1988.

Among the major economic sectors, industry climbed 20.8% and services by 9.6%, while the agriculture sector contracted by 0.1%.

Main contributors to growth were construction up by 25.7%, manufacturing by 22.3%, and whole and retail trade and repair of motor vehicles and motorcycles by 5.4%.

Household final consumption expenditure (HFCE) increased by 7.2%, gross capital formation by 75.5%, exports by 27.0%, and imports by 37.8%.

Government final consumption expenditure declined by 4.9%, and the net primary income fell by 53.8%. Meanwhile, the gross national income grew 6.6%.

“The robust performance is driven by more than just base effects. It is the result of a better balance between addressing COVID-19 and the need to restore jobs and incomes of the people,” Socioeconomic Planning Secretary Karl Kendrick Chua told reporters.

Quarter-on-quarter, however, the second-quarter economic growth is 1.3% lower than the first quarter on a seasonally adjusted basis.

“Between the first and second quarter, from GCQ (general community quarantine) or MGCQ (modified GCQ), we had to tighten a bit and that explains the slight reduction in the seasonally adjusted quarter-on-quarter,” said Chua.

“Had we not managed the risk better and allowed most sectors to operate and implement and enforce the health protocol, that seasonally adjusted quarter-on-quarter would have been worse,” he added.

Metro Manila was placed under the strictest enhanced community quarantine (ECQ) from March 29 to April 11, followed by the modified ECQ (MECQ) from April 12 to May 14.

This was followed by a GCQ for most of June and July, followed by the ongoing ECQ set to last until August 20, 2021.

With the economic managers targeting a 6% to 7% growth, the Philippine economy will have to expand by at least 8% in the succeeding quarters for this to be met.

The last time the Philippines recorded growth of 8% was in the first and second quarter of 2010, which was an election year.

“The outcome will depend on how fast we address the present spike and how fast we vaccinate people, because the more we vaccinate, the more we can safely reopen the economy,” said Chua. — KBK/RSJ, GMA News