Short Lockdown Period Will Preserve Our Economic Gains
The gross domestic product figures for the second quarter could be out as early as today. The favorable GDP figures are a reminder of the economy’s inherent strength in the face of adversity and its potential to create additional jobs if we forego lockdowns.
I will not be surprised at all if the GDP figures turn out to be more than positive. The low base effect coming from a deep contraction in the second quarter of last year, of course, contributed to the sharp rebound. But several indicators that confirmed the recovery also heralded the strong showing of the economy in the second quarter. Many corporate earnings of major companies, including big banks and conglomerates, were convincing, while other barometers point to an economy that is well on its way to a full comeback.
I was impressed, in particular, with our first-half trade figures officially released last week. Merchandise exports rose 21 percent in the first six months of 2021 to $35.9 billion from $29.7 billion year-on-year, surpassing the pre-pandemic level of $34.6 billion posted in the first half of 2019. The rebound in exports shows that our major markets like China, the US, the European Union and Asia are reopening. More importantly, the significantly higher exports suggest operations at the factories were at full capacity and were employing more workers despite the previous lockdowns.
Merchandise imports, on the other hand, surged 34 percent in June to $9.33 billion. The June figure brought total imports in the first six months to $53.34 billion, up nearly 29.8 percent from $41.08 billion year-on-year. Again, increasing imports mean a busier manufacturing activity ahead for our local factories and exporters.
Another key economic indicator that presages increased business activities is the latest manufacturing data. Per data from the Philippine Statistics Authority, the manufacturing sector expanded further both in value and volume in June.
The Volume of Production Index (VoPI) jumped 453 percent in June, or faster than the 263.2-percent increase in the previous month. The Value of Production Index (VaPI) for manufacturing also surged 440 percent from the previous month’s three-digit annual increase of 248.1 percent.
These positive data are telling us that more and more Filipinos are finding jobs in various sectors of the economy. More workers joining the labor pool will translate into higher consumer spending. With increased mobility and consumer confidence, household spending will naturally follow and bolster economic growth.
The correlation between lockdown and employment cannot be overemphasized. The government has reduced the unemployment rate to 7.7 percent in June this year from 8.7 percent in April. But the rate for August could increase again, with the implementation of the stricter enhanced community quarantine from August 6 to 20 in Metro Manila and some provinces.
The Philippines has successfully lowered the unemployment rate from 8.8 percent in February and 8.7 percent in January by going easy on transportation restrictions and the movement of our workers. The flexible quarantine rules lifted the economy as shown by the GPD figures in the second quarter.
I am not totally opposed to the government’s decision to place the entire Metro Manila and some provinces under the severest form of lockdown to curb the spread of Covid-19, especially the more virulent Delta strain. I just hope that the enhanced community quarantine will end as soon as Covid-19 cases reach a plateau and start to come down.
The economy, per the estimate of the National Economic and Development Authority, will lose around P210 billion for the two-week implementation of the ECQ in Metro Manila, which contributes about 60 percent to the GDP. The same Neda estimates say the ECQ will increase the number of poor people by up to 177,000, and 444,000 if we count the jobs lost from shopping malls, small retail establishments, fast-food restaurants and those rendering personal services.
In the meantime, we should strengthen the capacity of our local government units in contact tracing and isolating all Covid-19 cases to stop the spread of the virus. I still believe that selective lockdowns and a ramped-up vaccination of the population are the best approach to contain the virus transmission so we can spare our working class and keep the growth momentum.
We should preserve our recent economic gains instead of squandering them through widespread lockdowns.