‘Economy on way to recovery’

MANILA, Philippines — The economy is starting to recover but remains in a fragile state as shown by recent indicators, the National Economic and Development Authority (NEDA) said.

In a press briefing, acting Socioeconomic Planning Secretary Karl Chua said the slower decline in trade performance, the softer decline in manufacturing output, as well as the rise in capacity utilization in firms last May all point to a pickup in economic activity in line with the relaxation of quarantine measures in several areas.

Recovery in consumer demand and the return of more people to work also caused consumer prices to accelerate to 2.5 percent in June after four consecutive months of slowdown. This, however, can still be expected to remain within the government’s target range of between two to four percent.

Chua noted, however, that this recovery remains vulnerable to the continued rise in cases as well as the limited mass transportation for people returning to work.

“Recent developments show that the economy has begun to recover, but from a very difficult position,” he said.

“Opening up the economy and bringing back livelihoods safely require massive testing, including workers. For this, we support the decision to expand the testing protocol, to begin testing workers also, to bring back confidence to the economy. We also support the resumption of sufficient and safe public transport to facilitate the return to work,” he said.

With the transition to general community quarantine and modified general community quarantine – the less severe versions of the enhanced community quarantine that essentially shut down the economy – 75 percent of the economy has reopened.

However, only 50 percent of the public transport system in the country are now operational in keeping with social distancing measures intended to curb the spread of the new coronavirus that causes the COVID-19 disease.

Economic stimulus measures meant to jumpstart key industries, provide wage support to workers, and strengthen the country’s health system among others, remain pending in Congress.

A further threat to recovery would be the reimposition of the ECQ in the National Capital Region as the number of COVID-19 cases continue to rise and hospitals become endangered of becoming overburdened.

The economy is already widely expected to enter a technical recession in the second quarter of the year after a 0.2 percent decline in output in the first quarter of the year.

For the entire year, the economy is expected to contract by two to 3.4 percent.

Economic managers have already conceded that second quarter performance will be worse but have hopes the a rebound will occur in the last two quarters of the year.

“What we know from the latest data is the second quarter will be worse than the first quarter and it will be better in the third quarter. I don’t know to what extent it will be worse so we have to look at the data as we see them,” said Chua.

As seen in the effect of the severe two-month lockdown in the second quarter of the year particularly on trade and manufacturing data as well as on employment, Chua said the reimposition of enhanced community quarantine will necessitate a new review of macroeconomic assumptions for the year.

“We are seeing actually from the latest data in April and May is that the impact of ECQ is much more severe than expected,” said Chua.  “So once we see the newest data we are going to revise our macro-economic assumptions.”