It may seem difficult to understand recent economic developments. While foreign trade and manufacturing output rebounded in April from a year ago, unemployment worsened during the same period. Some economists have become optimistic about the Philippines’ economic outlook, but the World Bank (WB) lowered its growth forecast for this year last week.
World Bank senior economist Kevin Chua said the Philippines’ rebound this year is likely to be around 4.7%, lower than the WB’s previous projection of 5.5% and the 2021 target of the Duterte administration from 6.0 to 7.0%.
Perhaps all of these developments indicate that the economy remains in a precarious position. Everyone seems to agree that unless the COVID-19 pandemic is contained by mass vaccination to allow for a wider reopening of the economy, the recovery will never take place this year. A positive development in this regard has been the arrival of millions of vaccines in the past few days, with more on the way in the months to come.
Trade and Industry Secretary Ramon Lopez welcomed the foreign trade figures, saying the latest export data shows the country is steadily recovering from the negative impact of the pandemic and the figures were better than pre-pandemic levels.
The 72% increase in April was the second consecutive month of year-on-year growth after the 33.3% jump in March. The spike is believed to be due to the government allowing exporters to operate at full capacity even during the strict, enhanced community quarantine.
Imports, on the other hand, jumped 140.9% to $ 8.45 billion last April, a reversal of the 62.9% drop recorded in the same period last year. The big jump in raw material imports indicates further export growth in the following months, as these imported inputs are typically components for electronics, the country’s main source of dollar income.
Another source of optimism for Lopez was the year-over-year doubling of imports of manufacturing inputs, a sign that local manufacturing was intensifying. The Philippines Statistics Authority said earlier that the production volume index – an indicator of factory output – returned to 162.1 percent year-on-year growth in April.
On the other hand, there was the bad news. A new round of stricter closures beginning in late March in areas making up half of the economy pushed the unemployment rate to 8.7 percent in April, the equivalent of 4.14 million unemployed Filipinos, including one fifth in Metro Manila. The unemployment rate the previous month was 7.1%. Compared to 2020, the unemployment rate last April was a substantial improvement from the record unemployment rate of 17.6 percent – equivalent to 7.23 million Filipinos – from mid-March to May of l ‘last year, when 75 percent of the economy was at a standstill due to the region’s tightest containment.
President Duterte’s economic team described April’s unemployment rate as a temporary reversal of first-quarter employment gains, indicating the strong link between labor market performance and the level of quarantine restrictions. Some 2.1 million jobs, mostly in construction, agriculture, and wholesale and retail trade, were lost between March and April this year after Metro Manila and neighboring provinces returned to a more severe lockdown. The loss of jobs is clearly the main victim of the prolonged restrictions on mobility and economic activities. Higher unemployment, in turn, pushes more families into poverty.
Improving the rate of job creation is crucial in the country’s recovery effort this year. However, Under Secretary of Finance and Chief Economist Gil Beltran acknowledged that while the continued rebound in foreign trade and indications of expanding manufacturing activities are signs of green shoots, the downside risks posed by COVID remain. -19. Beltran and other experts inside and outside government are unanimous on one thing: the key to restoring and sustaining economic growth is to manage the spread of the virus and its risks.
Thus, whether the resumption of foreign trade and manufacturing – and other economic activities for that matter – will be sustained and gain sufficient momentum will depend on the relaxation of quarantine restrictions, which in turn depends on the success of the government. in containing the pandemic. The economic recovery from the worst economic implosion the country has seen since the war depends mainly on the success of the immunity of the population or the vaccination of some 70 million Filipinos as soon as possible.
As the World Bank’s Chua put it: “The main policy challenges are to manage the pandemic, to effectively provide social protection and to mobilize the sector’s participation in the recovery. There is still a long way to go to make this happen, and time is running out.
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