Duterte Year 4

Coronavirus drives Philippines toward recession as Duterte’s 4th year ends

Michael Bueza

This is AI generated summarization, which may have errors. For context, always refer to the full article.

Coronavirus drives Philippines toward recession as Duterte’s 4th year ends
The Philippines misses its full-year growth rate target for 2019 despite performing well in the 2nd half. Then the coronavirus causes a deep plunge.

The coronavirus pandemic has derailed the global economy and caused huge declines in international markets and economic activities.

The World Bank’s baseline forecast in early June showed that the global gross domestic product (GDP) will contract by 5.2% in 2020, while the latest forecast of the International Monetary Fund (IMF) put the contraction at 4.9%.

The Philippines has not been spared in this worldwide downturn. If current forecasts hold up, the country will plunge into a recession for the first time in over two decades.

In the 1st quarter of 2020 alone, the Philippine economy logged a GDP growth rate of -0.2%. This is the first time in 22 years, or since 1998, that the Philippine economy contracted.

If GDP growth worsens, economists and experts say the country will enter a recession, the first time also since 1998, during the Asian financial crisis. (If we follow the “two consecutive quarters of negative growth” definition of a recession, and using government data in base year 2018, the last time we experienced such an event was in 1991.)

Experts see a bleaker outlook for the Philippines in the 2nd quarter of 2020, which was when lockdowns were in full swing in many areas, and economic activities as well as physical mobility were still constrained. This is in addition to the high number of COVID-19 cases in the country.

The Philippine central bank, for instance, foresees a 5.7% to 6.7% contraction in the 2nd quarter.

A worse GDP growth rate for the April-June period may be abated, said economist JC Punongbayan in an email interview, “depending on policies that gradually open up the economy.”

“All of these will depend on the government’s ability to trace and detect new COVID-19 cases, and lockdown policies may have to be put in place – and disrupt the economy – again following signs of new waves of cases,” he added.

Economic activity at standstill

Tourism and transportation were among the hardest-hit sectors, said Jose Ramon Albert, a senior research fellow of the Philippine Institute for Development Studies. This is due to the imposition of foreign travel bans and local travel restrictions, and the suspension of public transport.

“Agriculture and industry pulled down economic performance. Only services grew in Q1,” Albert also said in an email interview. “As expected, some subsectors, specifically transportation, accommodation and food services, leisure, among others, shrank, while ICT (information and communications technology), financial/insurance services were robust.”

On the demand side, “investments (construction, durable equipment production, etc) shrank with private consumption stagnant,” he continued.

“At any rate, a slump was inevitable and in fact optimal because we want to quell the spread of the virus,” said Punongbayan. (READ: [ANALYSIS] Rare Philippine recession: Why this one’s unique, even necessary)

Other countries in the Association of Southeast Asian Nations (ASEAN) also felt the impact of COVID-19 in the 1st quarter of 2020.

Missed targets in 2nd half of 2019

Before the pandemic, and in the 1st half of President Rodrigo Duterte’s 4th year, the GDP rate may have been rising, but it is not as stellar as the country’s economic team markets it.

The GDP growth rate was 6% in the 3rd quarter of 2019, then 6.4% in the 4th quarter, from 5.5% in the 2nd quarter. (Using the new base year 2018, the rates are 6.3% in Q3 and 6.7% in Q4, from 5.4% in Q2.)

The improvements in the last two quarters of 2019, though, weren’t enough to meet the government’s full-year target range of 6% to 6.5%. The 2019 average was only 5.9%, the lowest annual growth rate since 2011.

Still, the Philippines was among the top economies in ASEAN in 2019. It was, however, outperformed by Cambodia, Vietnam, and Myanmar.

The strong performance in the 2nd half of 2019 was partly due to ramped-up government spending compared to the 1st half, when the economy was affected by the delay in the passage of the national budget, said Albert. The 10.5% full-year growth in spending in 2019, however, was still lower than the 13% growth recorded in 2018, he explained.

Albert also said that “household spending, which is a big chunk of the gross domestic expenditure, grew 5.6% in Q4 2019, faster than the 5.3% a year earlier.”

These, however, weren’t enough to offset weaknesses in farm output and trade. Albert said the main challenge on the production side was agriculture, while on the expenditure side, trade “has not done well, given trade tensions between US and China, and even between Japan and South Korea.”

“With the Philippines becoming more connected to the world economy, we get more affected by trade tensions,” he continued.

Punongbayan added that economic growth was “hampered by a slowdown in the growth of industry, which has, in fact, been contributing less and less to growth since 2016.”

He also pointed out that “the slower-than-expected rollout of big-ticket government projects such as Build, Build, Build” was another factor, alongside “a decline in business confidence in the Philippines.” (READ: [ANALYSIS] Why did Philippine growth drop to an 8-year low?)

In addition, both noted the slower pace of investments and spending.

Albert said the growth of capital formation was slower in the 4th quarter of 2019 compared to the same period in 2018, likely because the Build, Build, Build program “isn’t getting as much traction as government had hoped it would, with loans from China being extremely meager” and the government hoping to ramp it up with official development assistance funds. He also pointed out that investments declined by 0.6% in 2019, versus the 13.2% growth in 2018.

“This is why government has started to change its course about the Build, Build, Build and open up to possible PPP (public-private partnership) arrangements, and identified quick win projects that can be delivered before the President ends his term,” he continued.

Punongbayan added that overall growth “was pulled down by an unusual contraction of investment spending, which comprises, for instance, the production of durable goods and construction. The last time private investment shrank was in 2012.”


As for full-year 2020, the IMF’s latest forecast shows the Philippine economy will shrink by 3.6%, while the World Bank sees it contracting only by 1.9%.

In a virtual briefing in early June, World Bank senior economist in the Philippines Rong Qian said the country could soften the pandemic’s impact by strengthening its healthcare system, reprioritizing public spending, and expanding social safety nets, among others.

For its forecasts, the World Bank assumes that the pandemic “recedes in such a way that domestic mitigation measures can be lifted by mid-year in advanced economies and later in developing countries, that adverse global spillovers ease during the 2nd half of 2020, and that widespread financial crises are avoided.”

The IMF’s projections, meanwhile, factor in “a larger hit to activity in the 1st half of 2020 and a slower recovery path in the 2nd half” compared to its April forecast. It also assumes that financial conditions “will remain broadly at current levels.”

As a result, along with other nations, the Philippines’ GDP is seen to recover in 2021. The IMF forecasts that the Philippine economy will rebound by 6.8% next year, while the World Bank projects the growth at 6.2%. Fingers crossed. – Rappler.com

Add a comment

Sort by

There are no comments yet. Add your comment to start the conversation.

Summarize this article with AI

How does this make you feel?

Download the Rappler App!
Tie, Accessories, Accessory


Michael Bueza

Michael is a data curator under Rappler's Tech Team. He works on data about elections, governance, and the budget. He also follows the Philippine pro wrestling scene and the WWE. Michael is also part of the Laffler Talk podcast trio.