Economic recovery seen despite drop in GDP
Updated: Nov 29, 2020
With the Philippine Gross Domestic Product (GDP) growth dropping less this third quarter (Q3) of 2020 than it did in the second quarter (Q2), we’re looking at continuous recovery, and a potentially brighter new year.
With the current -11.5 percent growth from -16.9 percent growth, our GDP is deemed by some economists to probably hit the positive lane late next year, at the most optimistic state. According to Philippine Statistics Authority (PSA), the industries that contributed the least to the GDP were Construction, -39.8 percent growth; Real estate and ownership of dwellings, -22.5 percent growth; and Manufacturing, -9.7 percent growth. The construction industry slides further down from -33.5 percent growth to -39.8 percent growth Q2 to Q3. Manufacturing is slowly climbing from -21.3 percent growth to -9.7 percent growth Q2 to Q3. Our Gross National Income (GNI), as usual, follows the trend with -13 percent growth vs. -17 percent growth in the previous quarter. Financial and insurance activities industry remains almost unscathed, having 6.2 percent growth. This is not a bad mark for those in financing and insurance companies.
Many financing companies now have loan disbursement levels closer to their monthly average before the Covid-19 months. One financing company that’s registered in Pasig, accounts for 44.5 percent growth in loan releases between September and October, which signals its rush to the recovery stage. It has reached a disbursement level of 72.25 percent of its pre-Covid-19 average monthly releases, also last month. This can be perceived as the markets’ and the industries’ first few leaps towards stirring the economy further and jumpstarting activities that shall consequently lead to better GDP growth.
Patricia Poco-Palacios, General Manager of Global Dominion Financing Inc., one of the non-bank lending companies headquartered in Pasig, pointed out why financial products and services take on the top spot even at the peak of the current health crisis. “Aside from the fact that banking and remittance activities were considered essential activities during the pandemic, our economic managers made several bold but effective decisions to keep our economy moving in spite of the disruptions in supply chain and general mobility,” Palacios stated. “Thankfully, the country's financial system has adopted technologies such as internet banking and electronic money that have made it possible for financial and insurance activities possible amidst the pandemic,” she added.
Financial advisors from different insurance companies claim that it is much easier to offer insurance products now given consumers’ seemingly increased propensity to allocate their money in insurance and investment products to protect their future. The pandemic has certainly changed the way many Filipinos think, especially Pasiguenos. Christopher Dominguez, a resident of Barangay Sta. Lucia Pasig, recently attended an orientation for a life insurance company and shared that he started looking for variable insurance materials to save with higher interest rates versus other saving options and to indirectly invest as well. “No one knows what else could happen aside from this coronavirus,” Dominguez uttered.
"I met clients who are scared during this pandemic, scared for their health, for their family, and scared that they are not financially prepared should something unfortunate happen to them. That's when they realized the value of having life insurance," said Michelle Angela Catapang, a licensed financial advisor from Pru Life UK, one of the many life insurance companies in the Philippines.
The new normal ways to do business also made transactions more seamless with the use of technology like teleconferencing applications and programs like Zoom, Google Meet, Microsoft Teams, Viber, and other chat tools including Facebook Messenger which has been evolving their systems and usability behind the application to ensure that its users and audience can also use it more during these times. All of these made availing of financial and insurance services easier, and the activities less tedious for the advisors, representatives, and sellers within the industry.
Arguably, financial and insurance activities themselves are precursors to further economic growth, as these will fuel the activities of other industries and empower the market. Hence, it is plainly imperative that the growth of the services sector, to which these industries belong to, continue to rise over time. Businesses need replenished funding or capital to recover from the impact of previous and recent lockdowns implemented and get back on track. While financing companies easily come into the picture in these scenarios, we can also look at how the insurance companies now manage investments from their clients’ insurance premiums and top-ups. Screening and evaluation would definitely be more tedious and would require a higher level of quality this time around for these industries, but there is no doubt that we’ll find ways to simplify process steps and continuously improve.
Despite real estate (and ownership of dwellings) and construction industries’ negative growth at -22.5 percent and -39.8 percent respectively, and what seem to be continued fall from their previous quarter’s growth of -20.1 percent and -33.5 percent respectively, companies which are part of this industry resumed building communities and finishing projects. Listed low-cost housing developer 8990 Holdings Inc. said it has raised P1.3 billion from the issuance of enrolled corporate notes, according to a news published on their website in October 2020. The proceeds from the transaction will be primarily used to partially finance the payment of existing indebtedness of the company. “Despite the current environment, the company continues to deploy cash to operations and grow its business in key regions across the Philippines,” 8990 treasurer and director Richard Haosen said. 8990's projects include the Urban Deca Homes in Ortigas, Pasig City.
With more hands on deck, it is easier to push our economy towards growth now than before. One simple purchase or consumption could go a long way in helping our community out. While there are still a lot of precautionary measures we have to adhere to for our own health and safety, we can always maximize the use of technology and innovation to our benefit and make things one-app-away! Financial advisors, loan applications platforms, and real estate agents are now closer to you than you think. Going online to checkout products and services is inevitable, and if you are still not used to it, then now is the right time for you to study and experiment. You can simply apply for the right loan for you on a website, or ask for insurance recommendations on Facebook - just in case you have not seen any advisor post about their insurance products and services yet. Ask people around for help when needed, especially the millennials, but never wait for another time to do transactions and make purchases, when online and safer means are available.
Lungsod ng Pasig
Pasig, being part of the National Capital Region (NCR) which has registered the biggest share in the services sector in 2019 at 42.7 percent and posted the highest per capita index relative to the national level also in 2019 per PSA, showcases how incessant growth can be achieved through cooperation and collaborative efforts. As shared in many reports, Mayor Vico Sotto and the team, have been exerting tremendous time and energy in handling pandemic-borne challenges in health and education amongst many other aspects - from the provision of schooling gadgets for students, to building and rebuilding health facilities in order to accommodate the city’s increasing demand for medical attention. "They collect data and appear to make decisions based on them. Leadership displays competence and empathy. They use social media effectively to communicate accomplishments and to reach out to the community," Palacios replied when asked about what she thinks makes Pasig local government unit (LGU) effective in implementing policies and reaching out to its constituents amidst the pandemic.
Compounding is a pertinent principle in economics, and economic growth, no matter how small it is, can certainly contribute to economic development in the long run. Everyone’s role in the community, especially those in the private sector, is vital for us to realize economic development sooner than later - Pasigueños are supplementarily fortunate for having solid support from the LGU.
Is a -5% percent growth in GDP feasible in Q4, in spite of the recent calamities, including the super typhoons? We shall soon find out.