Strict curbs to impact Q3 economic performance

MANILA, Philippines — The Department of Finance (DOF) expects the third quarter economic performance to take a hit from the revert to lockdown in select areas.

In an economic bulletin, Finance Undersecretary and chief economist Gil Beltran admitted that the 11.8 percent gross domestic product growth in the second quarter was mainly due to a low base a year ago, when GDP contracted by a record 16.9 percent.

“The double-digit growth in the second quarter is mainly a result of the base effects a year ago when the whole country was placed under strict quarantine measures,” Beltran said.

He warned that the return to enhanced community quarantine (ECQ) in Metro Manila and other areas would affect any momentum the economy gained toward recovery. The National Economic and Development Authority (NEDA) has estimated at least P150 billion in economic losses per week with the tighter lockdown in multiple locations.

“The reimposition of stricter, but localized quarantine measures, will have consequences on economic activities in the third quarter. Note, however, that unlike last year, this year’s stricter quarantine measures are much more localized,” Beltran said.

NEDA has also projected that more than 600,000 workers may either lose their livelihoods or clock in reduced time due to industry closures and border restrictions under ECQ, resulting in around 250,000 people falling below the poverty line.

Beltran said legislators should now consider amendments to laws that limit foreign equity in several industries, preventing investors abroad from fully owning a business in the Philippines.

“The passage of CREATE (Corporate Recovery and Tax Incentives for Enterprises) Act and the continued infrastructure drive will help the country’s economic competitiveness,” Beltran said.

“To complement these, restrictions on foreign participation in the economy should be eased. Amendments to the Public Service Act, Retail Trade Liberalization Act and Foreign Investments Act will improve the country’s standing in mobilizing more foreign capital to the country,” he added.

The DOF economist said the arrival of vaccine imports would sustain gains made in containing the spread of the virus. However, he suggested that the vaccination pace be sped up to mitigate the impact of the pandemic on both people’s health and income.

“It is important that the risks posed by the epidemic be effectively managed to minimize the collateral damage on the economy and, consequently, people’s income,” Beltran said.