IN CHARTS: Philippine economy, a year in lockdown

As the coronavirus spread globally, the Philippines, along with other countries, was forced to put economic activities on hold to contain the virus.

A year has passed since the necessary hibernation, yet the Philippine economy is still struggling to find ways to reopen.

Here are some charts showing how bad the economy was during lockdown.

GDP

The pandemic plunged the Philippine economy to its worst contraction since World War II, with gross domestic product (GDP) falling by 9.5% in 2020.

It is the sharpest dip on record since available data dating back to 1947, and also the first GDP decline since 1998 (-0.5%).

GDP dropped to as low as -16.9% during the 2nd quarter of 2020, when the strictest lockdown was enforced.

It is expected that GDP for the 1st quarter of 2021 will remain in negative territory, while the rest of Southeast Asia will bounce back from recession.

The government's economic team wants to relax lockdown restrictions further, despite rising COVID-19 cases.

President Rodrigo Duterte's team estimates GDP growth for 2021 would settle between 6.5% and 7.5%, and hit the 8% to 10% range in 2022.

These ambitious projections were made along with the assumption that the entire country would still be under some form of quarantine for the entire 2021, and that the vaccine would be widely available by 2022.

Jobs

The government expected jobs to come back as lockdowns eased, but the figures show that the pandemic deeply scarred the labor market.

The annual unemployment rate in 2020 rose to 10.3%, equivalent to 4.5 million unemployed Filipinos, according to the Philippine Statistics Authority (PSA). This is the highest recorded annual unemployment rate since April 2005. (READ: [ANALYSIS] 4 million jobless Filipinos, but where is Duterte's aid?)

In January 2021, the PSA said some 4 million Filipinos were unemployed. This is higher than the 3.8 million unemployed in October 2020 and the 2.4 million in January 2020.

Meanwhile, underemployed persons or employed persons who expressed their desire to have additional hours of work were estimated at 6.6 million or 16% of the total employed persons in January 2021. This underemployment rate is higher than the October 2020 rate of 14.4%, and the January 2020 rate of 14.8%.

Remittances

Despite mass layoffs worldwide, repatriations, and lockdowns, remittances of overseas Filipinos fell by only 0.8% to $33.2 billion in 2020, as workers found ways to send home much-needed funds to help support struggling loved ones in the Philippines.

The amount represents 9.2% of the Philippines' GDP, according to the Bangko Sentral ng Pilipinas (BSP).

Economists expected a much sharper drop due to the global recession.

However, ING Bank Manila senior economist Nicholas Mapa said the strength of the peso, brought about by the weakness of the Philippine economy, may continue to negatively impact households relying on dollars.

"For all the heroics displayed by our modern-day heroes, we do note the fading punch packed by once very potent [foreign exchange] flows from abroad. We note that adjusted for exchange rate movements, remittances are actually down more substantially than the 0.8% recorded by the BSP," Mapa said.

In Philippine peso terms, Mapa noted, remittances have actually contracted by 4.8%.

Inflation

As people struggled to find jobs, food prices in the country rose.

The Philippines' inflation rate rose for the 5th straight month to 4.7% in February 2021, the highest since the 4.4% recorded in January 2019.

National Statistician Dennis Mapa said the uptick was mainly caused by the increase in meat prices. Transportation costs also continued to rise.

The Department of Agriculture pushed for a price cap on pork and chicken to tame prices in Metro Manila. The agency also urged producers to ship more pork to the capital region.

However, these moves led to inflation rising in regions.

Agriculture Secretary William Dar said the price ceiling will stay despite the uptick.

FDI

Foreign direct investments (FDI) contracted by 24.6% to $6.5 billion in 2020 from $8.7-billion net inflows in 2019, mainly due to the economic impact of the coronavirus pandemic.

This is the 3rd consecutive decrease in FDI since it peaked in 2017.

The economic team is banking on foreign investments to shore up the economy, backing legislative measures like corporate tax cuts to entice foreigners.

Note, however, that the tax reform comes as foreign investments are expected to remain tepid globally amid the recession.

Debt

The Philippines' outstanding debt rose by 26.7% to P9.7 trillion in 2020, as the government needed more funds to respond to the COVID-19 crisis.

This has increased to P10.3 trillion as of end-January 2021, according to the Bureau of the Treasury (BTr), as the government opted for another bridge loan from the BSP to meet financial requirements.

As expenses grew, revenues dropped by 9% in 2020.

Tax revenues dropped by 11.4% as the Bureau of Internal Revenue's collections slid by 10.3% and Bureau of Customs collections by 14.7%.

Higher expenses and lower revenues meant that the Philippine government ran a whopping P1.37-trillion budget deficit in 2020. (READ: Pandemic bloats Philippines' budget deficit to P1.37 trillion in 2020)

But a closer look at the figures showed that the government did not meet its targets, particularly on spending for the pandemic.

The BTr said the deficit was more than double or 107% more than the P660.2-billion shortfall in 2019, and equivalent to 7.6% of the country's GDP.

But while the fiscal gap widened, it was not as wide as what the government had programmed.

The fiscal gap in 2020 was 24.45% lower than the revised full-year program of P1.815 trillion.

Duterte's economic team had targeted P4.335 trillion in expenditures for 2020. But spending was lower by 2.49% or P107.8 billion compared to the target.

The Philippine government is expected to borrow $1.2 billion (P58.2 billion) from multilateral lenders in 2021 for COVID-19 vaccines. – Rappler.com

Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.

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