Our economy crashed to the lowest level since the war ended in 1946, so what now?
For the past several months, there was only one reply I would receive whenever I asked the vendors at our local wet market how they were doing, “Matumal pa rin.”
“Para tayong nasa sementeryo,” one fish vendor quipped, as she lazily waved off some meddlesome flies flitting about. “Napakatahimik.”
Indeed, the COVID-19 pandemic coupled with other natural disasters, buried the Philippine economy six feet underground last year.
The country's gross domestic product — a broad measure of the goods and services produced in a given period — went down by 9.5% according to the Philippine Statistics Authority. This record-high crash took away over a trillion pesos in supposed incomes.
"The year 2020 will be remembered as the most difficult year in our lives," said a joint statement from the administration’s economic managers, which was read by Socioeconomic Planning Acting Secretary Karl Chua today, Jan. 28.
COVID-19 disrupted our growth momentum and development trajectory.
21-year streak
Last year’s woeful economic nosedive was also more severe than the 7% contraction in 1984, when the economy tanked under the weight of a full-blown debt crisis, as skittish investors fled the country while the excesses of the Marcos dictatorship fully unravelled.
The GDP contracted again in 1991 by 0.58%, as the economy cratered amid incessant coup attempts, brownouts, the eruption of Mt. Pinatubo, and the Gulf War crisis that fueled oil price increases.
The next recession then happened in 1998, when the country’s GDP fell 0.57% due to the effect of the Asian Financial Crisis, a regional conflagration that derailed the “Philippines 2020” ambition of the Ramos administration for the country to be an industrialized tiger economy.
Though growth dramatically dropped in 2009 to 1.4% due to the global financial crisis triggered by the US subprime mortgage meltdown, the country has never again experienced a full-year recession since 1998. This 21-year growth streak came to a halt with the historic decline last year.
“COVID-19 disrupted our growth momentum and development trajectory,” said Chua.
Being a consumer-led economy, the lockdown hit the country particularly hard. Private consumption, which is nearly two-thirds of our entire GDP, fell 7.2%.
With most consumers tethered to their homes for the most part of 2020 due to travel restrictions brought by the pandemic, it was a dead giveaway that private spending plumetted.
Green shoots of recovery
But taken on a quarterly basis, the latter part of 2020 showed some sign of relief, as the fourth quarter grew 5.6% from the third quarter.
“This improvement was the result of the further reopening of businesses and wider accessibility of public transport since October 2020,” Chua said. “However, it also shows the limits of economic recovery without any major relaxation of our quarantine policy.”
But even as the government noted some “green shoots of recovery,” this year remains far from certain.
2021 will test everything: it will test our resiliency, our economic foundation, our healthcare system, and even our personal grit.
“2021 will test everything,” Chua said. “It will test our resiliency, our economic foundation, our healthcare system, and even our personal grit.“
The Development Budget Coordination Committee estimates that the economy will grow 6.5-7.5% this year.
Picking up the pieces
Yet, even the most cautiously optimistic predictions for this year remain hedged on the successful rollout of vaccination efforts, which remain precarious at best, to gradually cataylze the resurgence of consumer and business confidence. There is also the issue of recurrent breakouts of COVID-19 cases in some areas, which continue to ground travel and tourism, a traditional growth pillar for the country.
But bit by bit, some businesses are now slowly picking up the pieces. In fact a number of municipal offices in the country are now abuzz as enterprises rare to beat the deadline for the yearly filing of business permits.
To give businesses some form of relief, some local government units have also decided to waive off taxes and other regulatory fees.
In our local market in Antipolo, which until now has yet to recover its usual foot traffic, I found out that one new tenant has been quite beside himself with excitement in having his business permit for the year, a yearly task that most vendors usually treat as a cumbersome chore. This vendor, who has been selling bananas, has been strangely giddy in setting up shop that he has been even bugging the market administrator if he did the process right.
“Galing daw kasi sila sa bundok at first time nila magkaroon ng kontrata. Kaya sobrang excited na raw nila magtinda,” the market admin said.