Green shoots and silver linings

Based on latest economic indicators, there are hopeful signs that things are turning up. On the COVID-19 front, the surge in cases appears to have shifted to the countryside, and this means it’s not yet time to start dropping our guard. But based on my usual PiTiK test focused on presyo (prices), trabaho (jobs) and kita (incomes), the worst may be behind us.

On prices, overall inflation has held steady at a 4.5 percent annual rate for the third month in a row. The silver lining lies in the slower inflation in food and beverages, dominant in the budgets of the poor. Now at 4.6 percent, this item peaked at 6.7 percent in February, driven primarily by meat prices (with inflation rate still at 22.1 percent) that soared with the substantial reduction in pork supplies due to the African swine fever. More significantly, food price inflation has consistently been negative on a month-to-month basis since February, meaning prices have actually been consistently falling. This signals easing supply pressures, particularly for meat. Rice consumer prices have also continued to fall, along with vegetable prices. For rice and meat, reduced trade restrictions, which for rice started in 2019, are clearly helping.

On jobs, the April Labor Force Survey showed worsened unemployment at 8.7 percent compared to 7.1 percent in March. This has been blamed on renewed tightening of restrictions on people’s movement and on businesses, with the big upsurge in COVID-19 cases that happened in April. But there is again a silver lining here: There has actually been a net increase of more than 600,000 jobs in the economy since before the pandemic began. The total number of employed workers has risen to 43.27 million as of last April, from 42.65 million in January 2020, prior to the pandemic. In other words, the massive job losses that happened at the worst of our lockdowns in April last year have already been more than recovered.

Still, there has been a loss of 1.4 million wage and salary workers, who mostly turned to self-employment, which in turn increased by 1.25 million. Of this, more than 125,000 belonged to the category “self employed with employees,” which suggests that they put up a small enterprise that created jobs for others. To the extent that some of the displaced wageworkers were able to turn themselves into small entrepreneurs, this could well be good news, and a change for the better, for this class of workers. The rest of displaced wageworkers became unpaid family workers, which rose by 3.4 million since January 2020. Even as they do not receive a wage, they have been productive nonetheless.

On the output and incomes front, latest data show some emerging green shoots. Manufacturing, in particular, has swung around to positive annual growth of 0.5 percent. While seemingly small, it’s important to note that this is a year-on-year figure, which means the level of manufacturing output and incomes in the first quarter this year already exceeds pre-pandemic levels early last year. Top contributors to this positive growth were computer, electronic, and optical products; paper and paper products; printing and media recordings; chemical products; non-metallic mineral products; and electrical equipment. These are mirrored in the turnaround in our export performance, which has reversed its almost consistent decline over the previous 12 months to a 31.6 percent surge in March.

Beyond manufacturing, positive growth was also seen in utilities; information and communication services; financial services; and health and social work activities. While agriculture, fishing, and forestry declined slightly by 1.2 percent as a whole, significant growth was actually posted in important crops like rice (8.6 percent), corn (6.4 percent), coffee (12.3 percent), cacao (11.4 percent), pineapple (5.3 percent), and mango (4.1 percent). If not for the 23.2 percent fall in livestock induced by African swine fever, the sector would have grown positively as well.

All told, economic recovery appears to be underway. How fast or how slowly it would unfold hinges on how we bring our COVID-19 numbers down. For now, health recovery remains top priority.

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