assessment of q1 2021 philippine gdp growth performance

National Economic and Development Authority

Assessment of Q1 2021 Philippine GDP growth performance and prospects for recovery

KARL KENDRICK T. CHUA

Socioeconomic Planning Secretary 1


Recent developments and key messages1. It has been 15 months since COVID-19 hit us. Throughout this unprecedented crisis,

the government’s priority has been the total health and welfare of the people. 2. When COVID-19 infections spiked, the government imposed stringent quarantines.3. On the other hand, when the COVID-19 risk subsided, the government focused on

the safe reopening of the economy to help the people recover their jobs and income sources to address hunger and non-COVID-19 illnesses.

4. In other words, our quarantine decisions have always been based on a cost benefit analysis using both economic and health data.

5. Our aversion to risk for the most part of 2020 has placed the country in a long period of quarantine. This came at a huge cost to the economy and the people.

6. As we learn to live with the virus, we have recalibrated our approach to the pandemic by managing risks instead of just imposing blanket quarantines. We will continue to be guided by the latest health and economic data in order to safely reopen the economy once this present spike has subsided.

2

National Economic and Development Authority 3

The economy improved in the first quarter of 2021 with a smaller contraction of 4.2 percent, from an 8.3 percent decline in the fourth quarter of 2020.

6.9 7.4 7.3 6.9 6.4 7.2 7.5 6.6 6.5 6.4 6.1 6.4 5.7 5.4 6.3 6.7

-0.7

-17.0

-11.6-8.3

-4.2

-30

-25

-20

-15

-10

-5

0

5

10

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2016 2017 2018 2019 2020 2021

Perc

ent

Real GDP growth rate (year-on-year)

Source: PSA and NEDA staff estimates

Full-year 2020 growth: -9.6%


On a seasonally-adjusted quarter-on-quarter basis, the economy grew by 0.3 percent, suggesting the limit of growth unless we see

a major relaxation of quarantine level.

4th quarter 2020 0.3% growth

1st quarter 2021


On the production side, both industry and services showed smaller contractions reflecting the recovery, while the decline in agriculture reflects the ongoing crisis in the hog industry.

Real growth rates (%)2019 2020 2021

FY FY Q1 Q2 Q3 Q4 Q1

GROSS DOMESTIC PRODUCT 6.1 -9.6 -0.7 -17.0 -11.6 -8.3 -4.2

By Industrial Origin:

Agriculture, Fishery and Forestry 1.2 -0.2 -0.3 1.6 1.2 -2.5 -1.2

of which: Rice -5.9 3.1 -1.9 7.2 15.4 -1.1 8.6

Livestock -0.8 -6.9 1.5 -8.2 -7.7 -13.0 -23.2

Industry 5.5 -13.2 -2.5 -21.8 -17.6 -10.6 -4.7

of which: Manufacturing 3.8 -9.8 -3.3 -21.2 -10.4 -4.9 0.5

Construction 9.7 -25.7 -0.3 -29.4 -39.7 -26.8 -24.2

Services 7.2 -9.2 0.1 -17.1 -10.6 -8.0 -4.4

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On the expenditure side, growth was driven by government consumption, which increased by 16.1 percent. Public construction also significantly improved by 26.2 percent in Q1 2021.

Real growth rates (%)2019 2020 2021

FY FY Q1 Q2 Q3 Q4 Q1

GROSS DOMESTIC PRODUCT 6.1 -9.6 -0.7 -17.0 -11.6 -8.3 -4.2

By Expenditure:Household final consumption expenditure 5.9 -7.9 0.2 -15.3 -9.2 -7.3 -4.8

Gov’t final consumption expenditure 9.1 10.5 7.0 21.8 5.8 5.1 16.1

Capital formation 3.5 -34.4 -12.1 -51.5 -39.5 -32.2 -18.3

of which: Fixed capital formation 3.9 -27.5 -2.0 -35.8 -38.0 -30.0 -20.2

Public construction -4.7 -10.4 -0.7 2.4 -27.1 -17.7 26.2

Private construction 14.5 -36.9 -2.3 -46.6 -50.1 -42.9 -39.7

Exports 2.6 -16.3 -4.4 -33.5 -15.1 -10.2 -9.0

of which: Exports of goods 1.1 -8.6 -2.6 -30.6 -1.3 -0.1 2.4

Imports 2.3 -21.6 -7.4 -37.3 -20.7 -20.2 -8.3

of which: Imports of goods 1.2 -20.3 -8.5 -38.5 -18.9 -13.3 -1.6

6


The latest GDP performance is consistent with the recovery in the labor market.

Net employ-

mentcreation from Jan 2020 to March 2021

+2.8M

Indicator Jan 20 to Apr 20

Apr 20 to Jul 20

Jul 20 to Oct 20

Oct 20 to Jan 21

Jan 21 to Feb 21

Feb 20 to Mar 21

Net Jan 20 to Mar 21

Employment change -8.7 million +7.5 million -1.5 million +1.4 million +1.9 million +2.2 million +2.8

millionOf which change in unemployed

+4.8 million -2.7 million -0.8 million +0.1 million +0.2 million -0.7 million +1.1 million

Of which change in labor force

- 3.9 million +4.8 million -2.3 million +1.5 million +2.1 million +1.4 million +3.8 million

Source: PSANote: Due to the ECQ, the April round of the LFS was conducted between April 25 and May 16 for 2020.

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JAN 20APR 20

(ECQ)

JUL 20(GCQ)

-8.7M +1.4MOCT 20

(GCQ)

-1.5MJAN 21(GCQ)

+7.5MFEB 21(GCQ)

+1.9MMAR 21(GCQ)

+2.2M


In December 2020, the Development Budget Coordination Committee (DBCC) affirmed a growth projection of 6.5 to 7.5 percent for 2021. Our actions in the next eight months can

reverse initial losses from the imposition of the ECQ and MECQ in the NCR Plus area.

8

2021 2022Estimated economic growth (%) 6.5 to 7.5 8 to 10

This growth prospect is underpinned by three important policy actions:1. Safe reopening of the economy.2. Full implementation of the recovery package.3. Acceleration of the vaccine program.


We are working hard to use the present ECQ and MECQ period to improve our health system capacity by

increasing the number of hospital beds in the Philippines.

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30,602 total hospital beds (PHL)2,334 ICU beds (PHL)

May 1033,584 total hospital beds (PHL)

3,084 ICU beds (PHL)

May 10

March 28

Additional beds

Source: Department of Health

National Economic and Development Authority10

8,847 total hospital beds (NCR)781 ICU beds (NCR)

May 109,779 total hospital beds (NCR)

1,262 ICU beds (NCR)

May 10

March 28

We have also increased the number of hospital beds in NCR, where the spike is the highest.

Additional beds

Source: Department of Health


The government and the private sector are working together to improve contact tracing using automated means to bring down cases by more than 50%.

0

2000

4000

6000

8000

10000

12000

14000

26-Apr-2

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28-Apr-2

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02-May-2

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04-May-2

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06-May-2

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08-May-2

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10-May-2

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12-May-2

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14-May-2

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16-May-2

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18-May-2

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Daily

incr

emen

ts o

f CO

IVD1

9 ca

ses

Detection to isolation window vis-a-vis CQ status for NCR+

Scenario 1A: MECQ wholeMay

Scenario 2A: MECQ wholeMay

Scenario 1:Detect to isolate takes ~7 days

Scenario 2:Detect to isolate takes ~5.5 days

1C

1B

1A

2C

2B

2A


The latest economic performance shows the limits of economic recovery without any major relaxation of our quarantine policy.

Once the present spike is over, we can implement quarantine relaxations in a phased approach to boost our recovery this year. For instance, we can move the NCR towards MGCQ, allow families and children to participate in the economy, and restart face-to-face schooling.


Some 2.76 trillion pesos or 15.4 percent of GDP of fiscal, monetary, and financial resources have been allocated for the recovery package since last year.

PHP 506 billion(2.8% of GDP)

Grand total: PHP 2.76 trillion (15.4% of GDP) as of Dec 31, 2020


PHP 1,407 billion(7.8% of GDP)



Our safe re-opening of the economy is supported by our recovery package.

1. Bayanihan to Recover as One Act (Bayanihan 2)2. 2020 budget3. 2021 budget4. CREATE on lowering taxes and giving tax incentives5. FIST on addressing liquidity problems of firms6. GUIDE on addressing solvency problems of firms


We will accelerate the vaccination program to help boost business and consumer confidence.

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A total of 2.4 million vaccine doses have been administered across A1 to A4 priority groups as of 9 May 2021

Status A1 A2 A3 A4 TotalFirst dose 1,181,834 436,100 331,150 8,881 1,957,965Completed second dose 332,049 11,372 107,849 0 451,270

Source: National Task Force Against COVID-19


No. Vaccine May Jun Jul Total

1. Sinovac 2.0 4.5 3.0 9.52. Sputnik V 2.0 2.0 4.0 8.03. AstraZeneca None 1.3 2.0 3.34. Pfizer None 2.2 None 2.25. Novavax None None 2.0 2.06. Janssen None None 1.5 1.57. Moderna None 0.2 1.0 1.2

TOTAL 4.0 10.2 13.5 27.7Source: National Task Force Against COVID-19

An additional 27.7 million vaccine doses are expected to arrive by July 2021.

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The country’s strong economic position before the pandemic and improving economic data in recent months point to an economy that is on the mend.

1. Our economy may slow down in early 2021 given recent developments, but we will not backpedal. The country’s strong economic position before the pandemic and improving economic data in recent months point to an economy that is on the mend.

2. This time around, we also have much more latitude. Unlike last year’s ECQ, the government is taking a more calibrated approach to the present quarantines by addressing the highest sources of risks.

3. With the trend in COVID-19 cases declining in recent weeks, we can begin to relax quarantine levels and allow more people to return to work. Managing risks and safely reopening the economy are the most effective ways to address hunger and poverty brought about by the pandemic.

4. Everyone’s cooperation in strictly complying with the minimum health standards of wearing a face mask, washing hands, staying at home except to work and buy essential goods and services, and keeping a distance when outside homes will be crucial in averting another spike. Our resolve to work together and care for each other will underpin our prospects for a strong and inclusive recovery.


Thank you and stay safe.

assessment of q1 2021 philippine gdp growth performance

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