The Situation
The recession began in the first quarter of 2020 when GDP fell as a result of the Taal Volcano eruption, which hampered economic activity in neighboring industries. The economy continued to contract in the first quarter as a result of the stringent quarantine regulations placed in March of 2019. This downturn only became worse as the impact of the COVID-19 pandemic worsened. Last year, the GDP contracted by 9.6%. This is the largest annual decline recorded since the National Accounts data series for the Philippines commenced in 1946.
Slowly, however, the Philippine economy was able to open up again. According to a study published by the Asian Development Outlook in 2020, the Philippine economy was expected to increase by 4.5 percent in 2021 and 5.5 percent in 2022.
For a moment the future of the Philippine economy looked bright, with the gross domestic product (GDP), jumping 11.8 percent in the second quarter of 2021, its highest in the 32 years since the 12 percent growth in the fourth quarter of 1988. Progress in the country's vaccine rollout helped restore consumer and corporate confidence. This growth has freed the Philippines and has allowed it to emerge from its pandemic-induced recession.
But the dark days of an economy in dire need of recovery are far from over. Unfortunately, experts believe that the country’s recent achievements will be undone as the economy faces another loss with the reimposition of the stringent restrictions in the wake of an increase in COVID-19 cases attributed to the Delta variant.
What is a Recession?
The National Bureau of Economic Research (NBER) defines a recession as a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.
Forecasts for the Future
Despite the setbacks, Socioeconomic Planning Secretary Karl Chua said the possibilities for a significant economic restoration this year remain positive. He added that the Development Budget Coordination Committee is still reviewing the six to seven percent GDP objective for 2021. According to the Philippine Statistics Authority, the economy must generate at least 8.2 percent in the second half of the year to meet the lower objective, and as much as 10.2 percent to meet the higher objective.
On the other hand, Alex Holmes of Capital Economics suggests cutting the 2021 GDP forecast to five percent from the earlier six percent because of the increasingly uncertain situation. This will fall below government targets and would leave GDP over 14 percent smaller by year-end than the pre-COVID-19 trend.
What’s Being Done?
The government stated that it will continue to push for its three-pillar plans, which began in 2017, but was hindered by the crisis caused by the pandemic, to support our economy’s growth and recovery, including the acceleration of the vaccination program, the reopening of the economy, and the successful integration of the recovery package, to promote the economy's recovery.
Chua added that the country’s COVID-19 vaccination program is also on track with nearly 40 million doses having arrived in the country since March and the arrival of over 148 million doses more for the rest of the year. The economy is also expected to get a boost from the Build Build Build program and the implementation of the Corporate Recovery and Tax Incentives for Enterprises law. The expected passage of the amendments to the Public Service Act, the Retail Trade Liberalization Act, and the Foreign Investment Act will also help attract investments, push up growth potential, and create more and better jobs.
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