Economic recovery in 2022?

FROM FAR AND NEAR - Ruben Almendras - The Freeman

One of the companies I work for was selected as respondent for the Quarterly BSP Business Expectation Survey sometime in 2018, so I have to answer a two-page questionnaire a month before every quarter. Based on our company performance in the previous quarters, and our assessment of the economic and political horizon of the next 12 months we feel quite confident in our projections and expectations for the next four quarters. No one really expected the COVID pandemic and the consequent economic repercussions, so I believe we were quite wrong in our 4th quarter 2019 and 1st quarter 2020 responses to the survey. The 2nd quarter 2020 survey answers and results were somber and telling as corporate responders experienced the severe economic recession that decreased revenues both in volume and amounts. There were particularly huge reductions in most service sectors, but at a lesser degree in the manufacturing and food sectors. In the 3rd quarter of 2020, the overall confidence index was at -5.3%, but this had turned to +10.6% in the 4th quarter and +17.4% in the 1st quarter of 2021. All these mean that businessmen were expecting 2021 to be the start of the Philippine economy recovering with production, sales and revenues inching up to the 2019 levels. Supportive of this optimism is the rise in the Volume of Production indicator, a measure of factory utilization which went up to 60.5% from 42.8% in the 1st quarter of 2021. These surveys were done before the recent ECQ or lockdown of the National Capital Region or Metro Manila. I answered the survey questionnaires just last week for the 2nd quarter to 4th quarter already with this condition, so the business expectation and actual growth of the economy for the rest of the year is debatable.

The NEDA and the National Statistics Office made a final revision of the Philippine GDP decline from 2019 to 2020 at minus 9.6%. from minus 9.5%. If we round off the GDP at $377 billion in 2019 the economy shrunk by $37 billion in 2020, or at the rate of $100 million per day. To recover to the 2019 GDP level, the economy, or the value of all goods and services produced in the country during the year, have to get back to $1.03 billion per day to reach the 2019 GDP of $377 billion. The economic growth projection of both private and government economists has been scaled down with the ECQ in Metro Manila, but a 7% growth seem achievable. But at this percentage growth, and due to the “base effect”, in that we are coming from a lower base figure of 2020, the absolute growth amount will be less and will surely not bring us to the level of 2019. It will take another 7% GDP growth to bring back the Philippine economy by mid-2022 to the 2019 year-end level.

The positive factors that will support this recovery are; the vaccination and the herd immunity that will follow, the recovery of the US, China, Europe and our other trading countries which will revive our exports and OFW remittances, the coming national elections in 2022, and the high probability that we have bottomed out, as we are the worst economic performer in this pandemic in our region.

The negative factors which we hope and pray will not happen are; the government bungles even more their COVID pandemic responses and vaccination program, China’s aggressive moves in the Philippine and Taiwan territories impedes ship movements in the South China Sea, the cold war becomes a hot war, and a political instability like in Myanmar happens in the Philippines. If none of these happen, July of 2022 is looking very good.

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