Finance Secretary Carlos Dominguez III has said the negative first-quarter growth was the inevitable outcome of the initial ravages on the global economy by the coronavirus disease 2019 (COVID-19), which first surfaced in Wuhan, China last December and then started “upending life as we know it” at the onset of 2020.
Dominguez sees growth numbers heading deeper to negative territory in the second quarter with the economy in an extended stupor, before mounting a hoped-for bounce back in the year’s second semester on the back of government-led plans to accelerate state spending on infrastructure and social programs and pursue other measures to restore consumer confidence and induce a quick economic recovery.
But economic expansion and the state of the government’s bounce-back plan in the year’s second semester is contingent, of course, said Dominguez, on whether the tide has turned and an effective cure or vaccine will have been released commercially by then.
The Finance secretary issued the statement in reaction to Thursday’s report by the Philippine Statistics Authority (PSA) that the gross domestic product (GDP) contracted by 0.2 percent in the January-March 2020 period.
Dominguez said “the outbreak of this lethal virus, which subsequently froze economies and shuttered businesses in the four corners of the world, started to take its toll on the domestic economy in February as the lockdown in China caused supply chain disruptions and stopped arrivals of Chinese tourists, hence adversely affecting Philippine trade and tourism.”
As early as February, the Bureau of Customs (BOC) reported a decline in the country’s trade volume with China in that month’s first half, with the number of incoming twenty-footer equivalent units (TEUs) or cargo containers falling by a sizeable 62 percent from the year-ago level.
Tourism likewise absorbed a big hit as China’s lockdown stopped arrivals of Chinese tourists who accounted for the biggest number of arrivals last year, followed by those from South Korea, which imposed travel restrictions, too, because of the contagion.
By mid-March, he said, “the onrush of community transmissions in the Philippines prompted the national and local governments to impose containment measures in Metro Manila and most other parts of the country in a bid to stop the further spread of the virus, thereby grounding economic activity to a halt.”
“It did not help first-quarter growth,” said Dominguez, “that the local economies, particularly in the subregion of Calabarzon (Cavite-Laguna-Batangas-Rizal-Quezon) were adversely affected in January by the eruption of Taal Volcano.”
Although COVID-19 is an unprecedented health crisis that has wrought economic and financial havoc across the globe, Dominguez said the Philippines is on solid footing to meet the challenges of this contagion, given the country’s strong macroeconomic fundamentals resulting from President Duterte’s conservative approach to economic policy since his term started in 2016.
He said that record gross international reserves (GIR), a well-balanced debt management strategy, a higher sovereign credit and much improved revenue flows resulting from a comprehensive tax reform program (CTRP), among others, have deepened investor confidence in the Philippines “at this time when the government needs international support to finance Covid-19 response and lead the country to post-pandemic recovery.”
Dominguez said that as part of the Duterte administration’s four-pillar strategy to deal with the pandemic, it is crafting an economic recovery plan that is responsive to the needs of both consumers and businesses in order to boost consumption, create jobs and sustain growth in the long haul.
But with the primacy of saving lives and protecting communities in President Duterte’s overall strategy to defeat the deadly virus, Dominguez said “government plans to restart the domestic economy soon enough would have to be balanced with relaxing mobility restrictions in such a way as not to trigger an infection resurge that could lead us back to square one.”