PH ends recession with 11.8% growth in Q2

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  • The Philippine economy posted an 11.8% growth in the second quarter of 2021, the highest quarterly expansion since the fourth quarter of 1988 and ending the country’s recession
  • The growth is mainly due to base effects, with the economy coming from historic-lows last year as a result of strict lockdowns so any small gain translates to stronger readings
  • Growth in the April to June 2021 period is an improvement from the 3.9% contraction in the first quarter of 2021 and 17% decline in the second quarter of 2020
  • Main contributors to growth were improvements in manufacturing, 22.3%; construction, 25.7%; and wholesale and retail trade; repair of motor vehicles and motorcycles, 5.4%
  • The Development Budget Coordination Committee will review the latest economic data and risks associated with the Delta variant to fine tune government growth targets and adjust recovery strategies

The Philippine economy posted an 11.8% growth in the second quarter of 2021, the highest quarterly growth since the fourth quarter of 1988 and ending the country’s recession, according to the Philippine Statistics Authority (PSA).

The April to June 2021 growth is an improvement from the 3.9% contraction in the first quarter of 2021 and the 17% decline in the second quarter of 2020. The latest figure was also the highest since the 12% expansion recorded in the fourth quarter of 1988, and a reversal from the 9.5% decline in 2020, the country’s sharpest annual dip on record since 1946.

The second-quarter growth is generally seen as largely due to base effects, with the economy coming from historic-lows last year (16.9% decline in Q2 2020) as a result of strict lockdowns so any small gain translates to stronger readings.

Socioeconomic Planning Secretary Karl Kendrick Chua in a media briefing on August 10, however, countered that the growth was “driven by more than just base effects”. He noted: “It is the result of a better balance between addressing COVID-19 and the need to restore jobs and income of the people.”

PSA said main contributors to growth were improvements in manufacturing, 22.3%; construction, 25.7%; and wholesale and retail trade; repair of motor vehicles and motorcycles, 5.4%.

Among the major economic sectors, industry and services posted positive growths of 20.8% and 9.6%, respectively.

On the demand side, household final consumption expenditure improved by 7.2%, along with gross capital formation, 75.5%; exports, 27%; and imports, 37.8%.

On the production side, all sectors expanded except agriculture, which shrank by 0.1% because of the decline in pork production as a result of the African Swine Fever outbreak hounding the industry since 2019.

On the expenditure side, investments grew 75.5%, driven by the near doubling of private investments growth at 94.9%.

The government final consumption expenditure dropped by 4.9% in the second quarter of 2021 due to the high base effect from the roll-out of subsidies in the second quarter of 2020.

Chua said almost all sectors bounced back despite the imposition of enhanced community quarantine and modified ECQ last April and May 2021.

“This is a clear indication that managing risks, instead of shutting down large segments of the economy, stands a far better chance of improving both economic and health outcomes,” he noted.

Chua said prospects for a strong economic recovery in 2021 remain promising.

“Although there are speed bumps given the current ECQ in Metro Manila and other parts of the country, we are now better equipped to sustain continuous positive growth,” he said.

The Development Budget Coordination Committee will review the latest economic data and risks associated with the Delta variant to fine tune government’s growth targets and adjust recovery strategies.

The DBCC last July maintained its growth forecast of 6% to 7% for the Philippine economy this year. The projection was, however, issued prior to the latest imposition of stricter quarantines in various areas in the country due to local transmission of the highly infectious COVID-19 Delta variant.