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The COVID-19 pandemic ended a 21-year growth streak in the Philippine economy as strict lockdown measures aimed at containing the coronavirus outbreak brought economic activity to a near standstill.

Shortly after Q1 GDP data was released in early May, Research Head Leo Uy asked Geoffrey Ducanes, an Associate Professor at the Ateneo de Manila University Department of Economics, and Sarah Lynne Salvador Daway-Ducanes, an Associate Professor at the University of the Philippines School of Economics, to break down the data to see how the first two weeks of lockdown affected the Philippine economy.

After parsing the numbers, they also shared their outlook for the second quarter and beyond. Both agree that it’s going to be a long, tough road to recovery: Q2 is probably going to be worse than Q1, as the numbers will reflect the brunt of the lockdown.

Q1 GDP was bad. Q2 GDP will probably be worse.
Using the new base year of 2018, gross domestic product (GDP) contracted 0.2% in January to March, ending 84 quarters or 21 years of uninterrupted growth. The last time GDP fell into negative territory was in the fourth quarter of 1998, when the economy contracted by 3% amid the Asian financial crisis. Q2 is shaping up to be even worse as consumption, which accounts for 75% of GDP, will likely be in negative territory due to quarantine measures. “It looks pretty bleak. There’s really not a lot of room for maneuvering,” said Mr. Ducanes, who added that a contraction of more than 10% in Q2 is possible.

The government’s revised targets for the Philippine economy are “optimistic.”
The Development Budget Coordination Committee (DBCC) expects the Philippine economy to shrink by 2% to 3.4% this year. The Ducaneses believe that even the low end of this projection is optimistic. These targets, while possible, will be “very, very difficult to achieve.”

The COVID-19 pandemic makes it unlikely for the Philippines to reach its goal of reducing the poverty rate to 14% by 2022.
Post-pandemic simulations show that poverty incidence will more than double from the 2018 level, and the effect on the poverty gap and severity will triple or quadruple.

Remittances won’t save us.
Remittances from Overseas Filipino Workers (OFWs) acted as a lifeline for the Philippine economy during the 1997 Asian financial crisis and the financial crisis of 2007–08. That is not the case now as the pandemic has displaced thousands of OFWs (around 300,000 are expected to return home this year). According to projections, remittances may fall by as much as 30%.

Recorded remotely on May 14. Produced by Nina M. Diaz, Paolo L. Lopez, and Sam L. Marcelo.

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