DOF Economic Bulletin on 2020 Q2 Economic Performance
· The Philippine economy sharply contracted by 16.5% in the second quarter of 2020 amid, bringing the first semester’s growth to minus 9%.
· Consumption contracted by nearly 15.5% and investments, 53.5%. Government construction spending held ground, dipping by less than 1%, cushioning the plunge in private sector construction spending. Government consumption also surged by more than 22%.
· From the supply side, industry and services both posted double-digit declines, 22.9% and 15.8%, respectively. Tourism-related activities such as transportation and hotels and restaurants are among the worst-hit subsector, declining by as much as 59.2% and 68%, respectively, in the second quarter. Only the ICT, banking and finance, and public administration sub-sectors showed positive growth in the second quarter. Agriculture, also managed to grow by 1.6%. For the second semester, agriculture contributed 0.06 percentage point to growth.
DOF View
· The ongoing COVID-19 is, first and foremost, a health issue. The policy response for preventing its further spread (restriction of movements and physical distancing), however, inevitably made the economy a collateral damage. Such response was, nevertheless, a hedge against further complications. Calibrated quarantines could be ramped up or down, as the situation may call for, as demonstrated by the recent tightening of quarantine rules in the NCR and adjacent provinces.
· Restoring growth will depend to a great extent on the country’s acquiring the capacity to manage the health risks posed by the virus. Such capacity could tilt the odds in what is apparently a life-versus-livelihood dilemma and make it more of a life-and- livelihood dual outcome, but probably at a lesser scale than before under a “new normal” should there still be uncertainties about and risks posed by the virus.
· The fiscal sector will continue to play an active supporting role in fighting against the virus and a leading role, together with other economic sectors, in maintaining stability during the fight and reviving growth after the fight. The proposed recalibrated CITIRA will help provide support in reviving growth not only during its first year of implementation but also in the years thereafter.
· We have taken a serious hit in our bid to keep our people safe. The speculator-investor George Soros remarked, reflecting on his decision to pull out of his losing bets against the Japanese yen, “I had to pull back, which I did with great alacrity because my first principle is to survive first and make money afterwards.”[1]
Table 1 Economic Growth and Sources of Growth by Expenditure
Expenditure Growth (%) Contribution to GDP Growth (ppts)
19Q2 20Q1 20Q2 19S1 19S2 20S1 19Q
2 20Q
1 20Q2 19S1 19S2 20S1 Household Consumption 5.61
0.2
4 -
15.48
5.9
1 5.8
2 -
7.78
3.8
8 0.1
8 -
10.73 4.2
2 4.2
9 -
5.58 Government
Consumption 6.8
3 7.0
0 22.0
6 6.6
6 12.8
4 15.6
0 0.9
5 0.8
3 3.1
0 0.8
6 1.4
4 2.0 3
Investment -
0.8 0
- 17.40
- 53.50
3.9 0
1.2 6
- 36.56
- 0.22
- 4.47
- 13.92
1.0 2
0.3 5
- 9.46 Fixed Capital
Formation
- 2.91
- 4.3 6
- 37.76
1.77
5.8 2
-
22.27 - 0.82
- 1.10
- 9.8 4
0.4 7
1.6 3
- 5.71 Construction 1.31
-
4.3 6
- 32.92
4.7
9 12.7
3 -
20.37
0.2
3 -
0.63
- 5.47
0.7
5 2.0
9 -
3.18 General
Government -
28.0 8
- 0.6 0
- 0.93
-22.92
22.0
5 -
0.8 2
-2.07 - 0.02
- 0.0 5
-1.22 0.8
5 -
0.0 3 Corporations 27.3
1 -
4.9 5
- 27.04
26.9
0 13.9
8 -
15.97 1.5
4 -
0.38
- 1.85
1.61
0.9
6 -
1.15 Households 17.5
6
- 5.63
- 75.0 0
8.2 5
4.9 2
- 44.19
0.7 5
- 0.24
- 3.58
0.3 6
0.2 8
- 2.0 0 Durable Equipment -
15.07
- 5.91
- 62.12
- 5.68
- 8.14
-
33.47 -
1.27 -
0.47 - 4.23
-
0.47 - 0.69
- 2.45
Exports 3.11
- 4.4 5
- 37.04
3.6 1
1.13
-
21.36 0.9 6
- 1.39
-
11.16 1.13
0.3 3
- 6.54 Export of Goods 2.9 - - 4.1 - - 0.4 - - 0.6 - -
0 3.9
0 31.06
4 1.75
18.15 6 0.61 4.8
4 6 0.31 2.84
Export of Services 3.3
3
- 5.01
- 43.4 4
3.0 7
5.6 1
- 24.72
0.4 9
- 0.77
- 6.32
0.4 7
0.6 4
- 3.70
Imports 0.0
7
- 8.6 6
- 40.0 4
4.1 8
- 0.3 9
- 24.73
0.0 3
- 3.70
- 16.09
1.75
- 0.16
- 10.24 Import of Services -
0.46
- 10.5 4
- 42.2 8
3.7 9
- 1.29
-
27.27 - 0.17
- 3.60
-
14.41 1.31
- 0.43
- 9.30 Import of Goods 3.11
-
1.22
- 27.56
6.0
5 3.2
2 -
12.86 0.1
9 -
0.10 - 1.69
0.4
4 0.2
7 -
0.9 4
GDP 5.3
9 -
0.71
- 16.48
5.5
6 6.5
1 -
9.0 3
5.3
9 -
0.71 -
16.48 5.5
6 6.5
1 -
9.03 Net Primary income
from ROW 0.3
3 -
5.8 8
- 22.0 2
- 0.6 8
- 3.70
-
13.73
GNI 4.9
4 -
1.22
- 16.96
4.9
5 5.5
3 -
9.46
Source of Basic Data: PSA
Table 2 Economic Growth and Sources of Growth by Sector
Sector Growth (%) Contribution to GDP Growth (ppts)
19Q2 20Q1 20Q2 19S1 19S2 20S1 19Q2 20Q1 20Q2 19S1 19S2 20S1
Agriculture 0.74
-
0.26
1.61 0.6 4
1.73
0.6 4
0.0 6
- 0.03
0.13
0.0 6
0.17
0.0
6
Industry 2.50
-
3.37 -
22.87 3.6
5 5.6
9 -
13.54 0.77
-
1.04 - 6.86
1.13 1.72
-
4.11 Mining &
Quarrying 14.17 -
21.00
-
24.47 9.11
-
3.78
-
22.92 0.15
-
0.21 - 0.28
0.10
-
0.03 -
0.25 Manufacturing 2.05
-
3.82
-
21.25 3.61
2.8
0 -12.53 0.3
9 -
0.78 - 3.89
0.71
0.5
2 -
2.42 Utilities 8.12
4.8
9 -
5.84 5.8
8 7.3
0 -
0.90
0.2
4 0.14
-
0.18 0.17
0.2
3 -
0.03
Construction - 0.08
-
2.90
-
33.47
2.0 5
12.8 5
- 20.26
- 0.01
- 0.19
- 2.52
0.15
1.0 0
-
1.42 Services 7.52
0.6 0
-
15.79 7.3 2
7.7 0
-
8.21 4.55
0.35
-
9.75 4.37
4.61
-
4.97 Trade 8.56
1.92
-
13.14 7.8
5 8.3
9 -
6.34 1.45
0.31
-
2.29 1.29
1.59
-
1.06 Transportation 6.10
-
11.41 -
59.20 6.41
6.2 6
-
36.59 0.2 6
- 0.49
-
2.51 0.2 7
0.2 2
-
1.56 Hotels &
Restaurants
4.93
-
16.35 - 68.00
5.4 7
6.9 4
-41.21 0.10
- 0.39
- 1.35
0.12
0.16
- 0.90
ICT 5.55
5.11
6.60
7.6
3 5.4
0 5.8
8 0.16
0.15
0.19
0.2
2 0.15
0.17
Banking &
Finance 10.70
9.10
6.79
11.36
12.4
5 7.90
0.91
0.8
3 0.6
0 0.9
7 0.9
8 0.71
Real Estate 4.8 9
- 2.33
-
20.12 4.9 9
5.3 6
-11.51 0.31
- 0.16
-
1.28 0.3 3
0.3 5
-
0.75
Business
Activities 2.9
8 0.2
3 -
18.38 2.19
2.4
3 -
10.45 0.2
0 0.01
-
1.20 0.14
0.16
-
0.63
Public
Administration 11.37 5.53
8.32
11.53
15.27
7.11 0.5
2 0.2
2 0.4
0 0.4
9 0.6
4 0.3
2
Education 12.0 0
1.09
-
12.24
8.8 2
3.2 7
- 6.29
0.5 2
0.0 4
- 0.56
0.37
0.12
-
0.27 Social Services -
0.62
4.6 7
-
15.43 1.07
7.4 9
-
5.90 - 0.01
0.0 8
-
0.27 0.0 2
0.12
-
0.10 Other Services 6.63
-
10.56
- 63.02
6.6
6 6.4
2 -
36.98 0.15
-
0.27 -
1.47 0.16
0.13
-
0.90
GDP 5.39
-
0.71 -
16.48 5.5
6 6.51
-
9.03
5.39
-0.71 -
16.48 5.56
6.51
-
9.03
Source of Basic Data: PSA
Table 3 Selected Fiscal Indicators (in % of GDP)
2019Q1 2019Q2 2019Q3 2019Q4 2020Q1 2020Q2 Revenue 15.55 17.70 16.50 14.70 17.15 16.63
Tax 13.93 15.75 15.00 13.39 13.95 14.35 Non-Tax & Grants 1.62 1.95 1.50 1.31 3.20 2.28 Expenditures 17.59 16.72 21.92 21.26 19.09 28.06
Interest Payments 2.44 1.49 2.40 1.22 2.69 1.63 Primary
Expenditures
15.15 15.23 19.52 20.04 16.39 26.42 Primary Balance 0.40 2.47 - 3.02 - 5.34 0.76 - 9.79 Overall Balance - 2.04 0.98 - 5.42 - 6.56 - 1.94 - 11.43
Gross NG Debt 41.98 41.69 41.28 39.61 43.38 48.07 Domestic 27.96 28.05 27.45 26.27 29.74 32.86 Foreign 14.02 13.64 13.83 13.34 13.63 15.21 Sources of Basic Data: BTR, PSA
Table 4 Quarterly Growth and Sovereign Credit Rating and Outlook in Selected Economies
Growth (%) Credit Rating and Outlook
19Q1 19Q2 19Q3 19Q4 20Q1 20Q2 Moody's S&P Fitch
China 6.44 6.16 5.95 5.95 -6.83 3.16 A1 (stable)
A+
(stable)
A+
(stable) Indonesia 5.07 5.05 5.02 4.97 2.97 -5.32 Baa2
(stable) BBB
(negative) BBB (stable) Malaysia 4.50 4.90 4.40 3.60 0.70 A3
(stable)
A- (stable)
A-
(negative) Philippines 5.74 5.39 6.34 6.66 -0.71 -16.48 Baa2
(stable) BBB+
(stable) BBB
(stable) Thailand 2.90 2.40 2.60 1.60 -1.80 Baa1
(stable)
BBB+
(stable)
BBB+
(stable) Vietnam 6.82 6.73 7.48 6.97 3.82 0.36 Ba3
(negative)
BB (stable)
BB (stable) Sources: Official statistics offices; rating agencies; news reports
[1] Soros, G. [1995] Soros on Soros: Staying Ahead of the Curve, John Wiley & Sons, New York
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