Initial Economic Data Shows Merits of Reopening
It may be too early to tell if the Philippine economy is indeed on the recovery path. But judging from some emerging data, it is now safe to say that the Philippine economy is on the mend, thanks to its partial reopening.
The deep contraction last year, of course, will result in some positive economic numbers in 2021 because of the low base effect. Nevertheless, any improvement in year-to-year comparisons is proof that the economy has long bottomed out and has effectively stopped the bleeding.
At least three key economic indicators recently published in newspapers will prove that the economy now sees the light at the end of the tunnel. The country’s automotive sales, for one, have jumped in March this year compared with the same month in 2020, when the government first imposed a nationwide lockdown during the start of the pandemic.
The low base effect will easily explain the surge in vehicle sales, but they are still significant. Vehicle sales are reflections of consumer demand for big-ticket items. These consumers have regained their confidence to purchase more expensive products despite the lingering pandemic. They have chosen to spend from their savings and are now more confident to invest.
Sales of local car and truck makers surged 88 percent in March to 20,706 units from just 11,029 units in the same month last year. The numbers are still far from the 32,173 vehicles sold in March 2019 when Covid-19 was still unheard of. The improving sales, though, are proof that consumers are no longer hesitant to spend on big-ticket products. Increased automotive sales also equate to more factory production and higher employment. A more telling data is that of the import figures in February. Imports increased 2.7 percent to $7.6 billion in February, from $7.4 billion a year ago, the first time they rose in 22 months.
The Philippine Statistics Authority noted an increase in seven of the top 10 major commodity groups, led by the 23-percent rise in telecommunication equipment and electrical machinery shipments. The improvement in shipments of goods and equipment means factories are beginning to replenish their stock and are poised to increase their production in anticipation of higher demand as the economy reopens further toward the end of the year.
Our factories are presumably stepping up their production with the increased mobility of workers. We should further ease up on public transportation to fetch our workers so they can do their job in production plants, especially those in nearby provinces, like Cavite, Laguna, Rizal and Bulacan.
Another positive economic data is the level of investment commitments registered by the Board of Investments. Approved investment pledges reached P137 billion as of March 19, 65 percent higher than the P83 billion posted in the same period last year.
I share the optimism of Trade Secretary and BOI Chairman Ramon Lopez, who noted the rise in figures despite the pandemic. The BOI last year registered P1.02 trillion worth of investments. The numbers are a little off the 2019 record of P1.14 trillion, but they are still impressive considering the impact of the pandemic to the economy.
BOI-registered investments consist of spending pledges and they will not contribute to the gross domestic product at once. They are significant just the same. These projects will be built over time and will generate employment as the construction and operational phases progress. Per BOI data, the investment commitments as of March 19 will generate 12,000 new jobs, or up 13.3 percent from 10,605 jobs in the same comparative last year.
These data from the vehicle makers, imports and BOI-approved projects hopefully will not be the last among the positive numbers we may expect in the coming weeks. These encouraging figures are actually the products of a re-opened economy.
Improving automotive sales tell us that consumers are regaining their confidence to buy in the market. A rise in imports indicate that factories are starting to prepare for increasing demand while the higher level of investment pledges shows investor confidence despite the lingering Covid-19 cases.
Further reopening the economy and lifting the restrictions that impede the mobility of our workers will assure our recovery. The current economic data and upcoming figures will support this argument.