We expected the performance of our economy to drop significantly. What else can you expect when the government shuts down a big chunk of the economy for an indeterminate period of time, in the name of preventing a pandemic from taking hold in the country?
And yet, seeing that final number released two weeks back feels more surreal than we expected. Our GDP growth rate for the second quarter of 2020 is at -16.5%. That’s almost a fifth of the country’s whole economy, lost in just three months. Taking into account a more modest shrinkage of 0.7% in the first quarter, the Philippines is now in a technical recession.
If we’re going to be cynical about this, the worst is not yet over. As I write this, Metro Manila—where 36% of the country’s GDP comes from—is under modified enhanced community quarantine, spurred by calls from medical frontliners for a “time out” to allow them to better deal with the rising number of COVID-19 cases. Sure, it’s not as “total” a lockdown as in the past few months, but many businesses continue to operate in a limited capacity, and many people continue to be either earning less or out of work altogether. Add to that the damage caused by the longer ECQ period in the first half of the year, and it’s safe to say we will be looking at yet another negative number in three months’ time.
If we’re going to be optimistic about this, though, we can say that this is perhaps the lowest we can get. Of course, it stings to be reminded that our economy performed the worst across ASEAN this quarter. Thankfully the government has realized that keeping businesses closed will mean a more difficult recovery, and have taken (some) concrete and sensible steps to allow economic activity to return. We’ve seen people return to malls—and continue ordering online—as Manila shifted to GCQ. That should cushion the fall somehow.
The continued growth of the agriculture sector in the past quarter is also a bright spot. Sure, a growth rate of +1.6% year-on-year may still be unsatisfactory for many. However, considering the drastic drop of industry (-22.9%) and services (-15.8%), and the fact that agriculture has posted the same modest growth over the past few years, one can argue that we have a bit of a fighting chance, that it’s not all doom and gloom.
But, of course, it will take time. Efforts to make the country’s agricultural sector more competitive have been going on for years now, but we will only see the yields much later. Also, the ripples that led to -16.5% GDP growth—and the ripples that this will cause—will continue to reverberate. Businesses will continue to put expansion plans on hold. Working from home remains difficult while our Internet connectivity remains unreliable. The burden of online classes on parents who now have to juggle being the breadwinner and the teacher to their children will definitely hit productivity. Many continue to feel uncertainty about their future: think of those impacted by public transport bans, by slashed marketing budgets, by their employers closing shop for good. The pace of reopening the economy will always be faster than the pace of regaining consumer confidence, and we should be prepared for that.
Keep that in mind when the time comes—hopefully, fingers crossed—when we can confidently say we have taken control of COVID-19. There will still be a lot of uncertainty even after some sort of victory has been declared. There will be questions asked, about the government’s response to the pandemic, about investors’ confidence in the country in a post-COVID world, about whether we can be truly resilient. We might even see some unrest.
We will be in this for the long haul. Frankly, we have no choice. With our economy reliant on money going round, we have to work towards recovery. But, again, it’s not just our responsibility to bear. The government must intensify its efforts to combat the pandemic, and go beyond schemes designed mostly to make it look good. Build better capacity. Communicate without an agenda. Put expertise at the center of the response, rather than on the sidelines. We can, and we will, bounce back—but confidence and trust must be put in place for us to really be able to do so. Otherwise, it will all feel like we’ve worked for nothing, and headline figures of -16.5% may become a constant reality, rather than a one-time oddity.
SCMAP Live: Join us for our third installment of SCMAP Live this Thursday, August 20, co-presented with SAP. We’ll be looking at the new transport landscape as the pandemic rolls on with Asian Terminals Inc.’s Ma. Jelicia Yulo, LF Logistics’ Neil Urcia, and SAP’s Iain Macpherson. Register online through scmap.org.
Henrik Batallones is the marketing and communications director of SCMAP, and editor-in-chief of its official publication, Supply Chain Philippines. More information about SCMAP is available at scmap.org.