Philippine Economy Enters COVID-19 Induced Recession – Q2-2020

Posted on Posted in 2020-2021

By Hanie Andade


Last August 6, the Philippine Statistics Authority [PSA] (2020) reported the largest decline in quarterly GDP since the 1981 series. The indicator fell by -16.5 percent year-on-year* in the second quarter [Q2] of 2020. It was during Q2 that the Philippines was under its strictest form of lockdown, ECQ, to contain the growing number of cases of COVID-19 in the country. During these months, numerous industries had declined in productivity, which could be attributed to the various virus prevention methods (e.g., work from home, social distancing). Manufacturing, Construction, and Transportation and Storage had greatly affected the quarterly GDP of the Philippine economy, which was caused by the massive decrease in productivity during this period.


Figure 1. 

Industry Percentage of decline
Manufacturing -21.3%
Construction -33.5%
Transportation and Storage -59.2%


The sectors that saw the greatest decline were Services and Industry. It was the Services sector that contributed the most to the GDP drop at -15.8 percent. This sector had a 62.3 percent share of the Q2 2020 GDP, with the Transportation and Storage sub-sector falling under this category. Meanwhile, the Industry sector, which shared 27.7 percent of the Q2 2020 GDP, recorded its lowest ever decline at 22.9 percent. 62.2 percent of this sector consists of Manufacturing, whereas 21.6 percent of the total industry is shared by the Construction sub-industry. 


Unlike the two previous sectors, however, it was the Agriculture, Forestry, and Fishing [AFF] sector that saw growth during this period of decline. This sector only grew by 1.6 percent, with its growth dragged down by numerous sub-sectors, a few being: Livestock, -8.92 percent; Poultry and egg production, -4.8 percent; Other animal production, -6.3 percent; Banana, -1.6 percent; as well as Coconut inclusive of copra, -3.1 percent. The AFF sector shared 10 percent of the second-quarter GDP (PSA, 2020).


Considering the shares of GDP by Expenditure, Household Final Consumption Expenditure (HCFE), Gross Capital Formation (GCF), and Imports and Exports all saw a decrease. With the majority of the population staying home, consumption had decreased by 15.5 percent, investments (GCF) had gone down by 53.5 percent, and the exchange of goods and services had also declined with exports decreased by 37 percent and imports by 40 percent. Despite these declines in shares, Government Final Consumption Expenditure (GFCE) saw an increase. During this period where there was a decline in consumption and production, the government had to compensate for the lack of funds to keep the economy running. This specific group saw positive growth of 22.1 percent during ECQ. 


Not only had various sectors been in a state of decline as the COVID-19 situation got worse in the country, but 7.3 million Filipinos were rendered jobless during the peak month of ECQ (April). The PSA reported that the unemployment rate was at an all-time high at 17.7 percent, in comparison to January which was at 5.3 percent. “This is a record high in the unemployment rate reflecting the effects of the economic shutdown to the Philippine labor market due to COVID-19,” said National Statistician Claire Dennis Mapa (as cited in, Lopez, 2020). Despite the decreasing gender discrimination in the economy (often represented by the gender wage gap), males were more employed than females during April of 2020. 61.9 percent of men were employed from the 33.8 million employed individuals, whereas the percentage of women that were employed was reported to be 38.1 percent. Looking into the youth age group specifically, 8.4 percent of employed individuals ages 15 to 24 were male while 4.7 percent were female. Females were more likely to be unemployed than men during this period. The gender difference in employment may be attributed to the fact that more than one-fourth (27.7 percent) of employed individuals were classified under elementary occupations. These specific occupations include the usage of tools and physical labor. In general, however, it is the youth group that is deemed most vulnerable when the topic of unemployment comes to play as they have the least experience out of all age groups in their specific industries. The main sector that employs many individuals within this age group is the Services sector. According to the previous data regarding the decline in the share of GDP by Industrial origin, the Service industry was the hardest hit sector and it saw the largest decline during this quarter. 


Given the pandemic, 88.1 percent of those eligible for employment expressed their lack of interest in seeking employment during these times, while 38.5 percent of employed individuals were not at work. Thus, COVID-19 became the main reason as to why people chose not to be employed or why people did not come to work despite being employed (PSA, 2020). 


As the number of cases continues to rise and our healthcare system is further exhausted of its capacity to provide, the economy is further strained. With not enough production and household consumption taking place and an increasing dependence is placed on government consumption to continue to fuel the economy, the Philippine economy has reached a recession that was induced by COVID-19. Unemployment is at an all-time high; with many Filipinos laid off their jobs, their capability to consume and provide for their families decreases. This pandemic, especially during the second half of the year 2020, has put the economy at an impasse where possible economic remedies are impossible to achieve. While the lockdown during April and May has prevented the number of COVID-19 cases to rise, it has led to a further decline in our economy. Come mid-May to June, the economy has slowly opened its doors to production, however, with the cost of the health and security of the nation. 


By H1 of 2020, 92.3 percent of the yearly budget had already been utilized.  The Department of Budget Management [DBM] announced that it has released PHP 3.78 trillion of the PHP 4.10 trillion budget. According to them, a bigger budget allocation signified the government’s commitment to continue to fund its programs despite the pandemic (GMA News Online, 2020). As there was only 7.7 percent of the 2020 budget left, the government had borrowed more funds in response to the ongoing pandemic. As released in a statement from the Bureau of Treasury, outstanding loans have reached PHP 9.05 trillion in H1 of 2020, with an additional PHP 163.3 billion compared to May as the government borrowed more funds from both local and international sources. As the country is struggling to fund interventions to remedy the pandemic, an additional PHP 1.3 trillion has been borrowed (Lopez, 2020). This is in comparison to last year August, where our national debt was at PHP 7,389 billion (Bureau of Treasury, 2019). 


As people of the Philippines, not only are we required to pay taxes as it generally is a factor that affects the GDP of the national economy but with the looming reminder that the National Government’s debt is beyond the PHP 9 trillion mark, we are all obligated to pay back the debt that we owe. Each of the estimated 108.7 million Filipinos is to give PHP 83,239.00 each as part of their share if we were to fully pay the national debt all at once (de Vera, 2020). Not only do we have to err on the side of caution when it comes to this relatively new coronavirus, but we also have to pay a greater amount of money as this pandemic has immensely taken a toll on all of us. With plenty of expenses and the lack of funds, it is no surprise that the Philippine economy had gone into a COVID-19 induced recession in the H1 of 2020. With the declining conditions of our country’s healthcare system, economy, and people, what is next for the Philippines?


* Year-on-year:  data in comparison to the data of the same period from the previous year

This article is part two of the Philippine Economy Series. 




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GMA News Online. (2020, July 17). 92.3% of 2020 budget released as of end-June —DBM.


Lopez, M. L. (2020, June 5). 7.3 million Filipinos jobless in April amid COVID-19 

pandemic – PSA. CNN.


Lopez, M. L. (2020, July 29). PH debt breaches ₱9T in June as gov’t borrows more for 

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Philippine Statistics Authority. (2020, August 06). GDP growth rate drops by 16.5 

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Philippine Statistics Authority. (2020). Highlights, Second Quarter 2020; GDP growth 

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