Philippines Economic Update, June 2021 : Navigating a Challenging Recovery
The resurgence of COVID-19 cases and reimposition of more stringent quarantine measures held back the early signs of an economic rebound. The downside risk of a resurgence of infection, identified in the PEU December 2020 edition, has unfortunately...
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| Format: | Report |
| Language: | English |
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World Bank, Washington, DC
2021
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| Online Access: | http://documents.worldbank.org/curated/en/380011623076770757/Philippines-Economic-Update-Navigating-a-Challenging-Recovery http://hdl.handle.net/10986/35690 |
| Summary: | The resurgence of COVID-19 cases and
reimposition of more stringent quarantine measures held back
the early signs of an economic rebound. The downside risk of
a resurgence of infection, identified in the PEU December
2020 edition, has unfortunately materialized. The number of
daily cases increased from an average of 1,400 in December
2020 to nearly 10,000 in April 2021. The surging cases
prompted the authorities to reimpose stricter quarantine
measures in Metro Manila and nearby provinces for more than
one-and-a-half months between April and May. Since then,
daily cases have gone down gradually and critical care
occupancy rates have eased. However, the quarantine and
movement restrictions have hampered people's mobility,
adversely affecting domestic activity. The economy
contracted by 4.2 percent year-on-year in the first quarter
of 2021 amid prolonged implementation of containment
measures. The country registered the worst growth
performance among peers in the region such as Thailand (-2.6
percent), Indonesia (-0.7 percent), Malaysia (-0.5 percent),
and Vietnam (4.5 percent). The growth contraction was fueled
by weak domestic demand, driven by the combination of
containment measures, weak confidence, and rising inflation.
Meanwhile, tepid external demand was driven by the sharp
contraction in services exports amid lingering restrictions
and weak demand for international tourism while goods
exports recovered. The public sector was the main driver of
growth with an expansionary budget. The authorities are
supporting the economic recovery by accelerating public
spending. Stimulus spending and infrastructure investment
drove public spending from 19.1 percent of GDP in the first
quarter of 2020 to 23.4 percent of GDP in the same period in
2021. The spending is in line with the continuing
implementation of the pandemic response measures under the
"Bayanihan to Recover as One" Law (Bayanihan 2)
which was extended to June 30, 2021. The higher spending
comes at a time when public revenues fell from 17.2 percent
of GDP in the first quarter of 2020 to 16.0 percent of GDP
in the same period in 2021. This resulted in an increase in
the fiscal deficit to 7.4 percent of GDP in the first
quarter of 2021 from 1.9 percent of GDP a year ago. The
widening deficit was accompanied by an increase in the
public debt ratio from 54.5 percent of GDP by end-2020 to
60.4 percent of GDP as of end-March 2021. |
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