MANILA, Philippines — Mostly stuck at home for nearly two years, many affluent Filipino consumers embarked on what economists called “revenge spending” before the end of 2021, dragging economic growth to a crawl. another higher-than-expected 7.7% year-over-year in the fourth quarter of last year.
The increase in consumer demand when more economic sectors were reopened at the end of last year allowed gross domestic product (GDP) – the sum of goods and services produced in the country – to grow by an average of 5.6% in 2021, slightly above the government’s 5 to 5.5. percentage goal.
Socio-Economic Planning Secretary Karl Kendrick Chua Chua said that despite Omicron’s spike this month, the economy remained on track to meet the more ambitious growth target of 7-9% in 2022 as long as restrictions are eased before the end of this quarter.
“The door to our economic recovery is now wide open. The figures for 2021 show an economy ready to burst,” said Chua, who heads the state planning agency, the National Authority for Economy and Development (Neda).
“During the last quarter, we have further recalibrated our strategies moving to the alert level system with granular lockouts. Our efforts to reopen the economy safely have enabled more Filipinos to work and earn a living,” Chua said, citing an unemployment rate of 6.5% in November 2021, the lowest yet in the country. amid the protracted pandemic.
“This led to net job creation of 2.9 million above pre-pandemic levels. Our strategies in 2021 resulted in full-year growth that exceeded targets and expectations,” said Chua said.
National statistician Dennis Mapa told a press briefing that GDP for the year 2021 stood at 19.39 trillion pesos, compared to 17.94 trillion pesos in 2020, when the economy shrank by a record 9.6% – the worst in the Philippines after World War II. recession.
Total economic output last year approached GDP of 19.52 trillion pesos in 2019, before the COVID-19 pandemic hit and left millions jobless at the height of the lockdown measures. strictest confinement imposed in 2020.
Chua said he was confident that pre-pandemic GDP will be matched by early 2022, pointing to a “significant” drop in infections now after the Omicron outbreak.
If the downward trend continues, a shift to less stringent Alert Level 2 restrictions from the current Level 3 in many areas, including Metro Manila and neighboring provinces accounting for half of the economy, not only would earn 3 billion pesos per week, but also lead the way. for the lowest alert level 1.
Even the onslaught of super typhoon “Odette” (international name: Rai) in six regions last December did not shake GDP, with only 0.05 percentage point loss from full-year growth , estimated at 33.4 billion pesos. Chua nevertheless said that the government will this month complete post-disaster needs assessment and regional recovery programs to accelerate rehabilitation in areas razed by Odette.
In a report, ING’s senior Philippine economist Nicholas Mapa said fourth-quarter earnings weren’t just boosted by base effects – GDP contracted 8.3% there. is one year old, but also “supercharged” by consumption, especially on leisure activities during the Christmas holidays.
Private sector and household consumption accounted for about three quarters of the Philippine economy.
“The drop in daily COVID-19 infections helped boost so-called revenge spending in recreation and culture (up 41.6%) and in restaurants and hotels (21.9%) ahead of the season. parties,” Mapa said.
On a seasonally adjusted basis, fourth-quarter GDP rose 3.1% from third-quarter output.
“Household consumption was once again the main driver of economic growth, with spending up 7.5% year-on-year as lower COVID-19 cases and easing restrictions led to an improvement. mobility and an increase in social spending,” Oxford Makoto Tsuchiya, an economist from the Philippines, said in a report.
Looking ahead, Capital Economics Asia economist Alex Holmes said that “growth on the rest of [this] the year should be supported by a continued recovery in consumer spending.
“There are also plenty of opportunities for investment to rebound further. Investment in transport, in particular, remains very depressed. This should reverse as the movement of people recovers again near pre-crisis levels. pandemic,” Holmes said in another report.
But Pantheon Macroeconomics’ senior economist for Asia, Miguel Chanco, cautioned: “Don’t be fooled by the Philippines’ hard-hitting fourth quarter.” He said that despite the strong rebound in private consumption, other economic sectors “leave little to be desired”.
“The rest of the details are pretty disappointing across the board,” Chanco said.
“In particular, gross investment was up only 3% quarter-on-quarter, on our adjustment, nowhere near enough to reverse the 12.3% slump in the prior quarter,” Chanco said.
“This suggests to us that the pre-election uncertainties are already setting in much earlier than expected. We believe companies will stay on the sidelines in the first half of this year, at least until the political dust settles. Elsewhere, government spending was little changed in the fourth quarter,” Chanco added.
But Mapa pointed to “broad” growth in the last quarter of 2021, citing that government spending and capital formation posted “respectable” year-on-year growth rates of 7.4% and 12, 6%.
Tsuchiya noted that “public construction [continued] to lead the recovery as part of the government’s efforts to support the economic recovery,” referring to the Duterte administration’s ambitious “Build, Build, Build” infrastructure program.
However, Holmes pointed out that the robust growth rates were partly the result of the lows inflicted by the pandemic – “while year-over-year growth figures are expected to remain strong throughout 2022, this will primarily reflect the degree of recovery of the economy.”
“GDP was still around 3% below its pre-crisis level and 14% below its pre-crisis trend in the fourth quarter of 2021. This is much lower than anywhere else in the region. A large negative output gap will remain for a long time,” Holmes said.
Chua earlier acknowledged the socio-economic scars inflicted by the COVID-19 pandemic – estimates from Neda last year showed the staggering cost to the Philippine economy of reaching 41.4 trillion pesos in lost production until in 2060 due to declining private consumption, investment and government revenue coupled with declining worker productivity due to school closures and illness.
To address this, Chua said, “we will continue to pursue structural reforms that will make the country more resilient to future crises and consolidate our growth prospects.”
“We are optimistic that not only will we return to pre-pandemic levels in 2022, but that we will achieve upper-middle-income country status. We have implemented several groundbreaking reforms in the Duterte administration, and we will not slow down in the last few months,” the Neda chief said.
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