Philippines: 9.5 Percent Economic Shrinkage in 2020 Worst Ever Recorded

The Philippine economy shrank by 9.5 percent in 2020, the Philippine Statistics Authority said Thursday while projecting growth later this year tied to the nationwide rollout of COVID-19 vaccines.

The shrinkage was the worst recorded for one year since the government began tracking economic data in 1946, when the Philippines became an independent nation.

In the final quarter of 2020, the economy contracted by 8.3 percent despite the government easing travel restrictions during the Christmas holidays, reopening domestic tourism and allowing malls to resume limited operations, the statistics agency said.

“In the fourth quarter of 2020, our economy performed better with a smaller GDP contraction of negative 8.3 percent,” said Karl Kendrick Chua, the socio economic planning secretary.

The annual figure, he said, was at the bottom end of initial government estimates of contractions of between 8.5 percent and 9.5 percent.

The declines were felt in all sectors, with construction falling by more than 25 percent and food and services by more than 40 percent, he said. 

For 2021, Chua said he saw an “encouraging” sign in the months ahead as businesses and transportation are expected to open gradually and general coronavirus-related restrictions are to be eased.

“This will lead to a strong recovery before the end of the year, when the government will have rolled out enough vaccines against COVID-19 for a majority of our people,” he said. 

Earlier this month, the government said the first vaccine delivery from U.S. drug-maker Pfizer, which it has authorized for emergency use here, could arrive in February.

Meanwhile, the government approved similar authorization for British pharmaceutical company AstraZeneca’s vaccine, which is expected to be delivered in May, according to the state-run Philippine News Agency.

COVID-19 deaths, infections

Through Thursday, the government reported a total of 519,576 coronavirus cases in the country and 10,552 related deaths.

Globally, nearly 101 million coronavirus infections and more than 2.1 million deaths have been reported, according to disease experts at U.S.-based Johns Hopkins University.

The Philippines has been in various stages of a lockdown since March 2020, but economic activity has partially opened. Still, malls remain largely empty as people await the vaccine.

Chua noted that the government had allocated about 72 billion pesos (U.S. $1.5 billion) this year to provide vaccines to at least 50 million Filipinos. 

“The efficient and immediate rollout of the vaccine against COVID-19 will further help in safely opening the economy, as well as restoring and creating new jobs,” he said. 

Nicholas Mapa, a senior economist at ING Bank, blamed weaker household consumption and the country’s higher unemployment figures caused by small firms closing. 

“Despite the 9.5 percent contraction in the economy, we are not counting on the authorities to offer any form of stimulus to offset the downturn, both on the monetary or fiscal front,” Mapa said in a note to investors. 

He noted that government fiscal authorities appear to be optimistic for 2021. 

Despite that optimism, ING expects the economy to remain in contraction for at least the first quarter before rising as much as 13 percent by the second quarter, Mapa said.