The government released last week the economic growth data for the third quarter of 2013 and, as widely expected, the expansion of the Philippines’ gross domestic product (GDP) was sustained at a respectable 7 percent. Domestic economic growth during the quarter was supported by the robust performance of the services sector, higher household consumption, and increased government infrastructure spending. This brought GDP expansion for the first three quarters of the year to 7.4 percent compared with 6.7 percent last year, or well within the government’s 6-to-7-percent target for the whole of 2013. This will make the Philippines one of the best performers in Asia for 2013.
The announcement was followed by the usual commentaries from the government’s economic managers, who seemed to downplay the impact on the economy of the recent natural calamities, particularly Supertyphoon “Yolanda.” Economic Planning Secretary Arsenio
Balisacan said that despite the devastation caused by Yolanda, the Philippines remained one of the brightest spots in the region and would continue to be so for the rest of the year. Finance Secretary Cesar Purisima added that despite the typhoon, the country was strong enough to cope with the disasters. “This solid growth demonstrates the continuing resilience of the economy in the face of global economic challenges and natural calamities,” Purisima said.
It is perplexing how the government’s economic managers claim that the impact on the economy of Yolanda—and the 7.2-magnitude earthquake that struck Bohol and Cebu in October—will be “minimal.” Private economists are agreed that much of the typhoon’s impact will be felt in the fourth quarter, although they are quick to add that reconstruction activities—if massively implemented—could lift GDP in 2014. Some foreign and local economists have in fact scaled down their growth projections for the Philippines for the fourth quarter to input the impact of the damage wrought by the typhoon.
For instance, Bank of the Philippine Islands economist Jun Neri said GDP growth could ease to 5.5 percent in the fourth quarter due to the effects of Yolanda. “We expect the slowdown to be sustained through the first quarter of 2014, before regaining momentum again by the second quarter of 2014 as the bulk of the reconstruction efforts will start to kick in by then,” Neri said. He added that while growth could return to above 7 percent by the second half, full-year 2014 growth could slow down to 6.1 percent. Furthermore, HSBC economist Trinh Nguyen said GDP growth would likely slow to 5.1 percent this fourth quarter and to 5.8 percent in 2014.
Even Balisacan admitted in his latest talk with reporters that the destruction caused by Yolanda would have a big effect on the economy. “It’s quite substantial,” he was quoted as saying. He also noted that the ravaged parts of Eastern Samar, Panay and Central Visayas were contributing as much as 12 percent to the country’s overall economic growth, and that the typhoon could cut fourth-quarter GDP growth by between 0.3 and 0.8 percent. Balisacan warned that the magnitude of the effects of the recent disaster would now depend on how quickly the government can rehabilitate and restore economic activities in the affected communities.
Officials cannot downplay the devastation in Eastern Visayas as having a minimal effect on the entire economy. The economic impact of the devastation on the total GDP may not be that significant, percentage-wise, but the impact on human life and property is tremendous. The international donor community has said so. Economist Nguyen aptly described the situation thus: “The government estimates that the direct damage amounts to P24.5 billion, mostly agriculture losses, but about three million people are likely to have lost their jobs, so the indirect economic losses, if unaddressed, are likely to be more severe. A lot of infrastructure in the stricken Eastern Visayas region (farm-to-market roads, fishing boat landing sites, irrigation) was damaged or destroyed.”
The death toll from the monster typhoon has breached the 5,000 mark and is still rising. Latest estimates on the financial requirements to rebuild from the devastation have also topped P130 billion. From whatever angle one looks at the numbers, these are not “minimal.”