Philippine GDP shrinks 4.2% in Q1 2021

The COVID-19 pandemic continued to ravage the economy in the first three months of the year, dragging the growth of the Philippine gross domestic product (GDP) to negative territory for the fifth consecutive quarter.

The Philippine Statistics Authority (PSA) on Tuesday reported the first-quarter GDP growth at -4.2%, which compares with -0.7% recorded in the same quarter last year and -8.3% in the fourth quarter.

Metro Manila and other "high-risk areas" were placed under general community quarantine (GCQ) for most of the quarter, before being placed back under the strictest enhanced community quarantine (ECQ) starting March 29 due to the surge in  COVID-19 cases.

All three major industries contracted in the quarter -- agriculture at -0.3%, industry at -2.5%, and services at -0.1%.

National Statistician Dennis Claire Mapa, in a virtual briefing, said the major contributors to the decline in the first quarter were construction (-24.2%), other services (-38.0%), and real estate and ownership of dwellings (-13.2%).

The net primary income (NPI) from the rest of the world likewise declined by 75.8%, bringing the gross national income (GNI) down by 10.9% the same period.

"Our aversion to risk for most of 2020 has placed the country in a long period of quarantine. This came at a huge cost to the economy and the people," Socioeconomic Planning Secretary Karl Kendrick Chua said in the same briefing.

"However, we can see improvements as the rate of contraction has slowed," he added, noting a 0.3% quarter-on-quarter growth from the fourth quarter of 2020.

Stagflation

While the economy continues to be in a recession, consumer prices have steadily increased to an average of 4.5% in the first quarter of the year, above the government's target range of 2% to 4%.

This has spurred some concerns of stagflation, or a combination of slow economic growth and high inflation rates.

"We look at our growth and inflation target on a yearly basis, not on a quarterly or monthly basis. We will not call it until the data justifies it," said Chua.

Moving forward, Chua said the economy will likely rebound back to positive growth territory in the second quarter of the year.

"The only way for that to happen is if the quarantine restriction and economic activity is worse than last year," he explained.

The economy contracted by a record-low -16.9% in the second quarter of 2020, when the strictest lockdowns were set in place across the country.

For the second quarter this year, the NCR Plus bubble was placed under ECQ from March 29 to April 11, followed by the modified ECQ (MECQ) which will last until May 14.

Chua said that while the quarantine measures have been in place, the restrictions were not as strict as during the same quarter last year.

"It's very different. People can work, transport is open, curfew exempts the workers, and so on, so I don't think that negative second quarter is plausible," he said.

The government targets the economy to grow by 6.5% to 7.5% this year, which Chua said could still be met but growth for the succeeding quarters would have to surpass the upper band of the target to offset losses in the first quarter.  —KBK, GMA News