THE Philippines got hit by the second worst quarterly contraction in its economy on record in the third quarter. At 11.5 percent, the third quarter contraction was certainly slower than the second quarter’s 16.9 percent contraction, but it was still worse compared to most private sector expectations, as well as government projections.
The contraction is second worst on record, based on data going back to 1981, behind the second quarter contraction of 16.9 percent. That was just revised lower, from an initial estimate of -16.5 percent growth.
Forecasts from the private sector ranged from -6 percent to -11.2 percent.
Third quarter data from the PSA show government spending is still growing. In fact, it was the only portion that grew on the demand side. But it only grew 5.8 percent, its slowest since the first quarter of 2017. It was also much slower compared to the year-on-year growth in the second quarter, which hit 21.8 percent.
Mapa says the government should be spending more. He says “The government has been putting money in capital investments; they should also be jumpstarting demand, like the US’ payment protection program, consumption is key to get back on our feet.”
Acting Socioeconomic Planning Secretary Karl Chua however dispels suggestions the government is spending enough.
He says over P500 billion was allocated in support of vulnerable sectors, over P50 billion was given to the health sector for the fight against COVID-19, P1.3 trillion was infused into the financial system through actions by the Philippine Central Bank, and another near P700 billion has been prepared through government’s latest actions, including Bayanihan 2.
Chua says “the total is by the trillions, so that is a first, so we are not shy in providing both fiscal and monetary support. We are also doing other support such as the passage of CREATE which will lower the income tax immediately for 99 percent of SMEs that employ 60 percent of workers. We are pursuing FIST and GUIDE bills that will help more of the banks help distressed firms facing liquidity and solvency issues. We are also changing our policy to risk management to open up the economy further. We should look at it as a package.” (ABS-CBN News)
