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Philippines’ GDP decline in 2020 steeper than initially reported

THE PHILIPPINES’ gross domestic product shrank by 9.6% in 2020. — PHILIPPINE STAR/MICHAEL VARCAS

By Ana Olivia A. Tirona, Researcher

THE PHILIPPINE ECONOMY performed worse than previously reported in 2020, as the coronavirus pandemic continues to dampen business activity, the Philippine Statistics Authority (PSA) reported on Thursday.

Gross domestic product (GDP) — the value of all finished goods and services produced in the country at a given period — fell by record 9.6% last year, slightly faster than the 9.5% drop initially reported on Jan. 28.

Meanwhile, GDP for the fourth quarter of 2020 was unchanged at 8.3% from PSA’s preliminary estimate.

On the other hand, last year’s gross national income — the sum of the nation’s GDP and net primary income from the rest of the world — was revised to an 11.4% decline from the earlier estimate of -11.1%.

The performance in the services sector for the entire 2020 was revised downward to -9.2% from the previously reported -9.1%. Likewise, the decline in the industry sector is now estimated at -13.2% from -13.1%.

Downward revisions were noted in the following subsectors: manufacturing (-9.8% from -9.5%); wholesale and retail trade (-6% from -5.7%); accommodation and food service activities (-45.4% from -44.7%); information and communication (5% from 5.1%); financial and insurance activities (5.5% from 5.8%); and professional and business services (-10% from -9.3%).

On the expenditure side, growth in government spending was raised to 10.5% in 2020 from the preliminary 10.4%.

Trade in goods and services figures were also tweaked, with exports (-16.3% from -16.7%) and imports (-21.6% from -21.9%) both contracting less than initially reported.

Gross capital formation, or the investment component of the economy, was revised to -34.4% from -35.8%.

Bank of the Philippine Islands (BPI) Lead Economist Emilio S. Neri, Jr. said sectors that have been resilient at the outset of the coronavirus pandemic such as manufacturing, agriculture, and information and communications technology will be the main drivers for economic recovery.

“Sectors like recreation, retail trade and face-to-face services where health protocols are difficult to implement will continue to lag behind, however. This is where the public sector can give more attention to avoid a spiral of joblessness, erosion of consumer confidence and production as a good portion of our labor force work there,” he said in an e-mail.

“Capital formation may see a slightly faster recovery than household spending as many of the supply-side challenges causing inflation to spike will be addressed both by the private and the public sector’s projects, hopefully stepping up post-ECQ (enhanced community quarantine),” he added.

Meanwhile, IHS Markit Chief Economist for Asia-Pacific Rajiv Biswas said the reimposition of strict lockdown restrictions in Metro Manila and the surrounding provinces is “likely to be a key factor constraining the pace of near-term economic recovery.”

“[T]he pace of economic recovery in 2021 is likely to be less buoyant than previously expected, with renewed pandemic control measures dampening growth in the near term. Consequently, GDP growth in 2021 is expected to be in the 5% to 6% range, with stronger growth in 2022 as the pandemic is gradually constrained by widening vaccine rollout in the Philippines,” he said in a separate e-mail.

The revision comes ahead of the release of the PSA’s national accounts for Q1 2021 on May 10.

According to the PSA, revisions on the estimates are based on updated data submissions by data source agencies, in line with international standard practices.

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