In another time and in another climate, people would dance in the streets. The economy grew 11.8% in the second quarter of this year.
The last time our economy grew on this scale was in the fourth quarter of 1988, when economic expansion was measured at 11.9 percent. This growth spurt, however, was measured against a period when the economy was reeling from the effects of the debt crisis.
It was also a short-lived growth spurt. As soon as the national economy started to develop, we hit the energy ceiling. Our archaic power generation sector could only produce a limited amount to support economic activities. Shortly after posting this record quarterly growth spurt, the economy was plunged into darkness. Rationing of electricity has become the order of the day.
The Marcos regime bet on nuclear energy to guarantee the availability of energy. The Cory government has decided to put the expensive Bataan nuclear power plant on the back burner. To top it off, President Cory Aquino abolished the Department of Energy, the only agency capable of addressing our energy situation and providing a solution to the electricity crisis. It was a series of fatal mistakes by a chief executive who wanted to punish Marcos’ cronies more than laying the groundwork for lasting economic expansion.
The energy shortage has rocked our economy. The continued coup attempts against the Cory government have scared off potential investors in our energy industry. The spectacular growth spurt of the last quarter of 1988 was only a flash in the pan. The country has plunged into darkness.
The crippling energy shortage was not resolved until years later, under the presidency of Fidel V. Ramos. But the solution was expensive. We have had to pay the power producers through our noses with guarantees such as the oppressive buy-through provisions. The resulting high energy cost regime killed our manufacturing sector, making us an economy that subsisted on retail. Unemployment and poverty have increased.
When Noynoy Aquino sought the presidency in 2009, his campaign ran a stylish advertisement featuring actors carrying torches. The ad was pulled quickly after campaign strategists realized it was reminding people of the dark years caused by Cory’s poor decisions.
This bitter episode in our economic history prevents us from fully celebrating the 11.8% growth recorded in the second quarter. Many are worried about its sustainability.
The 11.8% growth exceeded the 10% consensus of business analysts. But much of the growth is due to what economists call the “base effect”.
Economic performance in the second quarter of 2021 is measured against our performance in the second quarter of 2020. During this period last year, the pandemic caused our economy to contract by 17%. We measure a period of growth versus a period of drastic decline. This explains the high number of growth.
In addition, the economy in the second quarter was 1.3 percent lower than in the first quarter of this year. This is an effect of the continued (albeit slower) contraction of our economy during the first quarter.
In terms of economics, we end up with a mixed bag.
The good news is that our economy is finally growing after five consecutive quarters of contraction. The bad news is that growth may not be sustainable over the next quarter due to the effects of the increased restrictions on movement which is a response to the spread of the Delta variant.
The good news is that all sectors of the economy have shown growth rates. This indicates that the economic expansion is broad. The bad news is that our agriculture and fishing sector, having defied the general contraction of last year, now appears to be stagnating.
The good news is that there is less underemployment, indicating better quality jobs for our beleaguered workforce. The bad news is that unemployment remains at an unsustainable level of 7.7 percent. Our economy is simply not creating enough new jobs to reduce the poverty rate that has skyrocketed since the start of the pandemic.
The good news is that our financial system is very liquid. Two-thirds of all public borrowing comes from domestic sources. The bad news is that our banks are not lending fast enough, stung by the rise in bad debts.
We could go on and on. But you get the picture of the mixed bag.
Third quarter growth is made questionable by the new round of lockdowns. The recovery to 2019 levels was postponed from the last quarter of 2022 to the first quarter of 2023.
The only way to dispel the clouds of doubt about the sustainability of our economic recovery is to achieve a critical mass of vaccinations. Thanks to the excellent work of Charlie Galvez and Vince Dizon, those responsible for our vaccination program, we are progressing fairly well with our vaccination effort and ensuring that the current containment will be the last.
A few days ago, we hit a record delivering 710,000 doses per day. With regular deliveries, we are now aiming to deliver one million jabs per day. At this rate, our immunization program will be the second best after Singapore in due course.
Even before a vaccine was fully developed, the Ministry of Finance had already negotiated sets of loans with the WB, ADB and AIIB for the purchase of vaccines. For this reason, our vaccine supply is fully funded. It is only the availability of the global supply that has held us back.
With tens of millions of doses now in our stockpile, we could head full steam ahead to achieve public protection and possibly herd immunity by the end of the year. This will make our economic expansion more secure.