By Vir B. Lumicao
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| The 11.8% growth in the economy was a rebound from massive losses last year, says IBON |
The Philippine economy grew 11.8% in the second quarter this
year, but economists see no real recovery as growth was a rebound from the massive
collapse caused by the pandemic during the same period last year.
Research group IBON says growth will likely fall in the remainder of 2021 as the impact of economic scarring, continued lockdowns, and misguided fiscal conservatism is felt.
One of the constraints to a real and rapid recovery is the government’s refusal to spend out of a misplaced obsession with creditworthiness, said the group.
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Government figures show it spent Php2 trillion in the first half of this year, which is just 9.4% more than the Php1.8 trillion spent in the same period last year.
IBON said this is below the average annual growth in government spending since President Rodrigo Duterte took over in 2016.
The group said the government must spend more on the fight against the virus through free mass testing, expansive contact tracing, and targeted self-quarantines. Unless it does so, community quarantines could go on, said the group.
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Herd immunity also remains a distant target due to tight vaccine supply and more infectious Covid-19 variants, so, lockdowns remain possible.
Economists said the second-quarter growth was only the second double-digit expansion since the Second World War. The first was the 11.99% growth recorded in the fourth quarter of 1988 after the Asian financial crisis.
While the growth halted five straight quarters of economic contraction, IBON and economists point out that this comes on the back of the worst-ever dip of 17% in the country’s gross domestic product (GDP) in the second quarter of 2020.
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Economist JC Punongbayan referred to the headline-grabbing second quarter growth as a “mathematical illusion,” while National Statistician Dennis Mapa noted the GDP actually dropped to -1.3% based on a quarter-on-quarter rate.
Per sector, industry and services grew 20.8% and 9.6%, respectively, while agriculture, the bright spot in 2020, contracted by 0.1%. By industry, accommodation and food services grew the most at 53.4%, with other services at 39.4% and construction at 25.7%.
Year-on-year growth will only get worse in the coming quarters as the base effect fades, while the economy remains virtually stagnant, IBON said.
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Several basic issues need to be resolved to sustain high
growth and hasten recovery, according to IBON, which noted that the economy was
already slowing even before the pandemic.
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| New lockdowns will further dampen economic growth, say experts |
“The lockdown-induced economic scarring of households and enterprises comes on top of this and will drag recovery even as vaccination proceeds and quarantine restrictions are relaxed,” the research group said.
“High unemployment, bloated low-paying or non-paying pseudo-work, and collapsed family savings dampen the purchasing power of millions of households. Hundreds of thousands of enterprises that have closed or only operate partially will not easily reopen or expand,” it added.
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The government’s refusal to spend more on stamping out the pandemic is another downside.
In late July, Finance Secretary Carlos Dominguez III predicted a “pretty good” second-quarter economic growth due to the improved employment situation in the country.
He said in an interview on Bloomberg TV that he is “not big on predictions” but cited the drop in unemployment and underemployment last May.
“The fact that we’ve created about 2.5 million new jobs over
the last year seems to be good signs for us,” he said.
IBON, however, was unimpressed. It pointed out that despite the
positive growth, the 3.9 million jobless in the second quarter (average of
April-June) were still more than in the first (average of January-March).
According to the group, 1.5 million more Filipinos were jobless in the second quarter than in January 2020.
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