Mr. Robert Joseph, Jr., president of the Rotary Club of Manila (RCM); Mr. Herminio Esguerra, chairman of the program committee; the board of directors; officers, members and guests; ladies and gentlemen, good afternoon.
I have been invited today to talk about financial forecasts for 2021 amid the pandemic. But before I present the economic prospects over the near term, let us briefly step back and take a look at the past year.
First, I will go through recent economic developments and trends. Second, I will share some views on the likely path of the economy, keeping in mind the highly uncertain environment we are in now. Finally, I would like to take this opportunity to update the RCM members on the BSP’s initiatives and advocacies.
The year 2020 began with the Philippine economy in a position of strength.
Real GDP growth had averaged at above 6 percent over a 10-year period, or a 6.4 percent average from 2010 to 2019. The robust growth of the domestic economy in recent years was achieved in an environment of generally stable inflation and was anchored on purposeful structural reforms.
The country’s strong track record of prudent policymaking has likewise led to a robust external payments position, record-high international reserves, improved external debt metrics, and healthy public finances.
At the same time, Philippine banks continue to be sound, stable, and well-functioning based on all metrics.
These robust fundamentals gave us the monetary and fiscal space to navigate the first few months of this crisis.
The COVID-19 pandemic had required the government to impose stringent lockdown measures to save lives and help both the public health sector and LGUs respond effectively to the health crisis.
Unfortunately, our economy, like many other economies around the world, suffered from the lockdowns. After exhibiting 84 consecutive quarters of growth, the Philippine economy contracted in the first three quarters of 2020, amounting to an average real GDP decline of 10 percent.
We must note, however, that the COVID-19 pandemic has constrained economic activity not only in the Philippines, but across the globe.
Nevertheless, we are seeing early signs of recovery.
The manufacturing purchasing managers index has risen to 49.9 in November, close to the 50-point expansion threshold. At the same time, the manufacturing volume of production index has also improved.
The gradual easing of lockdown measures and promising developments regarding vaccines have contributed to improvements in business operating conditions.
Latest surveys indicate improved optimism of businesses and consumers, however.
The overall business confidence index reverted to positive territory at 10.6 percent in Q4 from –5.3 percent in Q3.
This optimism in the last quarter of 2020 was attributed to the reopening of businesses amid the “new normal,” easing of community quarantines nationwide, seasonal factors such as an uptick in demand during the holiday season and the start of the milling season, and the increase in volume of sales and orders.
Meanwhile, the overall consumer confidence index was more optimistic at –47.9 percent in Q4 from –54.5 percent in Q3.
The improved outlook during the current quarter was brought about by expectations of more jobs and permanent employment; additional and high income; effective government policies and programs such as the Social Amelioration Program and the Plant, Plant, Plant Program; reduced community restrictions, the reopening of businesses, and the expected end of the COVID-19 pandemic when vaccines are made broadly available.
Another cause of optimism are the results of the Google Mobility report, which provides insights on how people’s movements have changed throughout the pandemic.
The report details how activities for retail, recreation and workplaces continued to improve for the Philippines, suggesting a rise in economic activity.
Notably, grocery and pharmacy figures were shown to come close to the baseline period, approaching pre-quarantine levels.
Consequently, numbers under “residential” gradually declined to 18 percent as of December 7, 2020-compared to their peak of 43 percent in April 2020-implying that people are staying less at home.
However, transit station activities remained subdued at –46 percent given the limited public transportation options at present.
The unemployment rate moderated to 8.7 percent in October 2020 from a high of 17.7 percent in April, during the…