Tuesday, May 11, 2021

Macroecon 3, Five quarters of consecutive Philippines GDP contraction

Today, the Philippine Statistics Authority (PSA) released the country's Q1 GDP, it's -4.2%. So five quarters of consecutive contraction.


We should congratulate these very bright doctors and groups for endlessly calling for lockdown, which are music to the ears of the DOH and IATF -- Drs. Leachon, Salvana, OCTA, PMA, HPAAC, etc. They are very bright physician-economists, their indefinite lockdown as economic policy, their designation of businesses and work which are essential and non-essential, which businesses should continue and which ones should go bankrupt, have been carried out for 14 months straight, and the above chart is the result of their bright policy.

The -4.2% contraction is also deeper than what many private and academic economists have predicted, median of -2.6%. This was published in BusinessWorld yesterday.

Jonas Ravelas of BDO (-4.5%) and Alvin Ang/Ateneo (-3.8%) have good assumptions and hence, good projections. The others, especially those with -3% or higher have poor assumptions. All projections are as good only as their assumptions. Lousy assumptions, lousy projections. Like climate and ever-warming projections.

In our UP ETC chat group, I have an exchange last night with a friend, ADB guy, he projected -3%. I said my projection is -3% to -4%, or around -3.5%. My basis is electricity consumption. Meralco electricity sales Q1 was -4% drop, WESM electricity consumption for Luzon-Visayas grids Q1 was about -4.3% so I was looking at -4% originally.

Also in Q1 2020, all provincial buses were still running, many hotels and restaurants open, until March 15. Lockdown ECQ was imposed March 16. Whereas in Q1 2021, about 90% of all provincial buses still not running, many hotels and resorts still close. This alone would lead to deep dive in GDP Q1 this year.

IATF policies lead to major economic distortions. Like putting Metro Manila + neighbor provinces Bulacan, Rizal, Cavite under is ECQ or MECQ, then nearby provinces like Tarlac, Pangasinan, N. Ecija, Batangas, etc erect checkpoints and stop ALL vehicles if motorists have travel passes. If they don't have one, they are told to turn back. Government personnel and motorists are often exempted, even if they have no travel pass they just allowed to proceed, among the regular government double talk.

Household consumption constitutes about 70% of GDP. Here are the components and performance.

Notice that Q1 2021 Household consumption of P3.15 trillion is at similar level with Q3 2018 of P3.15 trillion, 2 1/2 years ago.

As of today May 11, seven East Asian economies have reported their Q1 2021 GDP:Taiwan 8.2%, Hong Kong 7.8%, Vietnam 4.5%, South Korea 1.8%, Singapore 0.2%, Indonesia -0.7%, Philippines -4.2%. China reported 18.3% growth but CN is known for doctored and dishonest econ data.
So far PH remains the worst performing economy in the region.a

Is a 7% full year 2021 GDP growth possible? 
No. Best scenario would be 5-6. Here's why.
At -4.2% contraction in Q1, that means average growth in the next three quarters, Q2 to Q4 must be at least 9.3% to have full year 7% growth, Which is impossible. First half of Q2 (April 1 to May 15) we are still in tight lockdown ECQ or MECQ, the best we can grow in Q2 might be 5%.

See also:
The Constitution and FDIs, February 16, 2021 
Macroecon 1, Household debt to GDP ratio, March 23, 2021 
Macroecon 2, Modest growth in Q1 2021, some Asian countries, April 30, 2021.

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