‘Swoosh’ recovery

We have seen the unprecedented shrinking of our country’s economic growth as measured by the gross domestic product (GDP) in two successions this year. It plummeted to a low of -16.5% in the second quarter on year-on-year basis. From a revised minus -0.7% slump in the first quarter of this year, the GDP sunk deeper into contraction in April to June, the Philippine Statistics Authority (PSA) announced last week.

Thus, the Philippine economy is suffering a “technical recession” which refers to two consecutive quarters of negative growth.

This was the period when the 2019 coronavirus disease, or COVID-19 pandemic broke out in our country.

Faulty contact tracing and dilly-dallying to close our borders from the emerging contagion led to the spread of the COVID-19 to the rest of the country.

Thus, President Rodrigo Duterte invoked his powers under the country’s 1987 Constitution to declare a public health emergency crisis. On that basis, President Duterte  reactivated the Inter-Agency Task Force on the Management of Emerging and Infectious Diseases (IATF-MEID) and started imposing hard lockdowns starting March 15. The IATF now conducts 15-day recalibration of the community quarantine depending on the gravity of COVID-19 local transmissions all over the country.

According to the analysis of the PSA, the steep decline of GDP was largely contributed by the manufacturing (3.9%); construction (2.5%); and transportation and storage sectors (2.5%). On the expenditure side, the PSA noted, household consumption declined by 10.7%, reflecting diminished demand. All of which were the result of consumption and business expansions that were put on hold during the lockdown period.

The sectors that pushed growth in the second quarter were financial and insurance activities; public administration, defense and compulsory social security; as well as information and communication. The PSA cited this reflected the demand for loans and demand for financial services due to heightened demand for information technology and communication tools (online, digital) during the period.

The PSA credited likewise the government’s spending for the social amelioration program (SAP) and other state subsidies to protect the vulnerable population from the COVID-19 contagion in fueling growth during the period.

But the stellar performance came from the Philippine agriculture sector that registered 1.6% growth for this period.

The country’s agriculture sector buoyed up the GDP after a long period of being the laggard among the economic sectors in the past four years of the Duterte administration. This is much better than the 0.7% recorded in April-June last year.

Under the stewardship of Department of Agriculture (DA) Secretary William Dar, the country’s food, fishery, and livestock industries have significantly improved production.

It was only in August last year when President Duterte appointed Dar to join his Cabinet. At that time he came into office, the country’s agriculture sector was grappling also with the pandemic problems of the bird flu (H5N6 or the avian influenza) in 2017, then the outbreak of the African Swine Flu (ASF) last year. And in between these two pandemic contagions that heavily cost losses to our poultry and swine industries, Dar had to contend with the artificial rice shortage due to rampant smuggling.

Despite the tough challenges brought about by the COVID-19 pandemic, the decline in palay prices, the continuing ASF cases, the DA chief credited the country’s agriculture stakeholders made sure there was enough food for Filipinos. According to Dar, the country’s farm industry managed to pull off a 0.5 percent growth in April to June.

Although the 1.67% growth of agriculture seemed to be too little amount as source of economic booster, this was definitely a far cry when the country’s agriculture posted negative 1.1% in 2016. However, Dar has to work harder in order to break his own record of 6.7% growth rate of the country’s agriculture from 1998-1999.

This was when he was the Agriculture Secretary of former president Joseph Estrada. “Dar promised me: Mr. President, the Philippines will not only be self-sufficient in rice but we will be able to export rice by the end of your term. But it never came to pass because I was not able to finish my term,” Mr. Estrada vividly recalled and guffawed at his own reminisces.

It was not an empty boast. The country’s agriculture growth was actually sustained to reach 9% when the late Edgardo Angara took over as Agriculture Secretary and Dar became presidential adviser for agricultural economy during the last few years of the Estrada administration. Dar’s outstanding record as an agriculture expert and scientist is highly recognized not only in our country but also abroad. He once headed the International Crops Research Institute for the Semi-Arid Tropics based in India from 2000 to 2014.

When Dar joined the Duterte administration last year, the Cabinet Cluster on Economic Affairs finally included the DA Secretary as one of its key members. He is now considered part of the Duterte economic advisers like Finance Secretary Carlos Dominguez, Trade and Industry Secretary Ramon Lopez, and Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno.

Despite the “technical recession” experienced for the first half of this year, the BSP Governor believes the country is cushioned by its very “robust macro-economic fundamentals” that remain strong. “In the most recent economic episode, the economy plunge because of the strict, nationwide lockdown to save lives and to allow the build up of health facilities and testing capacity due to the pandemic. It is not because the economy was weak. The contraction is temporary,” Diokno argued.

Diokno, however, dismissed as overly optimistic a V-shaped recovery of the Philippines, that is from the previous high growth diving sharply and then growing back up steeply. “V recovery is a fantasy. Think it’s more like a Nike – Swoosh-like recovery,” Diokno quipped.

The BSP Governor may have been looking down at his jogging shoes when he sent me this text message.