Q1 GDP down by 4.2%

PHILIPPINES - In Brief 11 May 2021 by Romeo Bernardo

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The on the ground feedback we were getting of the economy’s performance leading up to today’s GDP announcement had suggested a more buoyant economy than the reported 4.2% year on year (yoy) contraction. The headline number implies that GDP grew by only 0.3% quarter on quarter, or an annualized rate of just a little over 1%, at a time when lockdown restrictions had become much less stringent (for 10 of the 12-week quarter). Available non-seasonalized data breaking down the 4.2% yoy GDP contraction show mainly the public sector driving demand side growth (double-digit growth rates for government consumption and public construction) supported somewhat by external demand, seen in a 2.4% yoy rise in goods exports. Household spending and other fixed investments continued to decline, revealing weak private demand weighed down not just by covid19 uncertainties and lower incomes among middle to lower income groups, but also higher Q1 inflation that further reduced purchasing power.Production side accounts show 10 of the 16 major sectors contracting yoy, including agriculture due mainly to the impact of the African Swine Fever on livestock production. On the positive side, mirroring export recovery, manufacturing eked out a 0.5% yoy growth clip after four quarters of decline, with more significant contributions from the financial, information and communication, public administration, and health and social work sectors.The re-imposition of strict lockdown measures from the last week of March to date, with any lifting of restrictions later this month likely to be done cautiously, implies a sequential decline in 2Q output (although the yoy growth clip will be high due to base effec...