Key sectors moderate revenue bleed as curbs ease

MANILA, Philippines — Key industries continued to suffer dismal earnings in the final quarter of 2020 versus a year ago, despite holiday demand supposedly pumping them up, but the bleeding was more moderated as the economy restarted.

The gross revenue index, a measure of revenue performance of select sectors, declined 12.4% year-on-year to close 2020, the Philippine Statistics Authority reported on Thursday. The drop was softer than the annual 13.1% decline in preceding 3 months.

It was a result expected by Nicholas Antonio Mapa, senior economist at ING Bank in Manila, more so because businesses’ earnings tend to track gross domestic product (GDP) that last year fell by a historic 9.5%.

Yet on a quarterly basis, GDP did gain some ground, tempering losses to just 8.3% year-on-year in the fourth quarter, and therefore benefiting enterprises. “With the economy stuck in low gear, we can expect GRI and GDP to experience only modest gains after favorable base effects fade,” Mapa said in an email.

Lower revenues mean less appetite for firms to hire. In the same report, total employment index, which gauges job generation, sank 10.3% year-on-year as of December. Its counterpart that measures compensation likewise slid 8.7% from year-ago. 

Indeed, that enterprises were ending up in the red should be no surprise. After all, a sluggish loosening of coronavirus restrictions that started June has severely dampened business confidence. Consumers also preferred to stay indoors for most of the time, while this year's tightening of prohibitions anew in the capital region does not bode well for future activity.

The revenue drop was across-the-board on an annual basis, but the scale of damage varied. The largest year-on-year decline came from “other services” where the sub-index shrank 32.1% after Filipinos cut back on non-essential spending. 

Existing mobility curbs hurt transport, leading to a 29.6% on-year decrease in revenues. Weak power demand dragged down electricity, gas and water industry by 10.9% from last year. 

But quarter-on-quarter, six sectors showed signs of improvement, boosting optimism they are slowly adopting to pandemic uncertainties. The biggest quarterly gain of 22.3% came from property, where developers most likely resumed getting amortization payments after state-imposed moratoriums were dismantled.

Buoyed by last-minute imports to meet holiday demand, revenue index for trade went up 15.5% from previous quarter. Christmas also propelled spending on “other services” by 8.16%. Transport by 3.3%, and power and water utilities by 1.5%. 

Mapa is hopeful more firms’ balance sheets would soon find themselves back in black, no matter how shallow. “We may start to see some gains in GRI by 2Q but we caution just like in GDP, these headline grabbing growth prints will be more due to mathematics rather than a true economic rebound or recovery,” he explained.