Lourdes O. Pilar, Researcher
GROSS REVENUE generated by firms continued to decline in the final three months of 2020 as the economy remained in a pandemic-induced recession, the Philippine Statistics Authority (PSA) reported on Thursday.
The total gross revenue index (GRI) — a measure of sales generated by companies — fell by 12.4% year on year in the fourth quarter of 2020, according to PSA’s latest Quarterly Economic Indices report.
This was slower from the 13.1% decline recorded in the third quarter of 2020 but a reversal from 3.2% growth recorded in the fourth quarter of 2019.
Other services posted the largest fall during the quarter after dropping by 32.1%, a turnaround from 7.9% expansion last year.
Also seeing annual declines during the period were transportation, storage and communication (-29.6%); real estate (-27.3%); electricity, gas and water supply (-10.9%); manufacturing (-9%); and trade (-1.8%).
Bucking the downward trend were the indices for financial and insurance activities (8.8%) and mining and quarrying (6.9%).
“The culprit for the broad-based decline is of course the soft economic activity because of the pandemic,” Robert Dan J. Roces, chief economist at Security Bank Corp., said in an e-mail interview.
“Other services index declined the most as this category contains the sectors that were more vulnerable and sensitive to the ongoing community quarantine curbs and health protocols: recreational, personal services, private education, and hotels and restaurants,” he said.
ING Bank N.V. Manila Branch Senior Economist Nicholas Antonio T. Mapa said that the gross revenue index’s contraction reflects an economy in recession.
“Interestingly, the services sector constitutes the bulk of the economy and with the majority of the economy in some form of lockdown or with consumer confidence down, it’s easy to see why these sectors suffered the most,” Mr. Mapa said in a separate e-mail interview.
Meanwhile, the employment index fell by 10.3% in the fourth quarter compared with the 0.05% growth logged in 2019.
Companies in the following sectors shed jobs: transportation, storage and communication (-23.6%); other services (-18.3%); trade (-9.8%); real estate (-3.7%); manufacturing (-3.5%); and financial and insurance activities (-0.9%).
On the other hand, sectors that saw higher employment were construction (12.5%); mining and quarrying (4%); and electricity, gas and water supply (1.1%).
Compensation likewise dropped by 8.7% in the fourth quarter from a 4.9% growth a year earlier, led by construction (-27.1%); transportation, storage and communication (-25.2%); other services (-15.7%); trade (-8.1%); manufacturing (-4.9%); mining and quarrying (-4.7%).
Increases were observed at the indices of electricity, gas and water supply, financial and insurance activities and real estate with 25.1%, 11.4% and 5.5%, respectively.
On a per-employee basis, compensation grew by 1.8%, slower from 4.9% a year earlier using current prices. At constant 2016 prices, however, it shrank by 1.2% from a 3.3% growth last year.
Mr. Mapa expects the index to recover by the second quarter this year.
“As the economy reopens and base effects wash out, we may start to see some gains in GRI by second quarter, but we caution just like in GDP, these headline-grabbing growth prints will be more due to mathematics rather than a true economic rebound or recovery,” he said.
“With the economy stuck in low gear, we can expect GRI and GDP to experience only modest gains after favorable base effects fade.”
Mr. Roces, for his part, cautioned that the rising coronavirus disease 2019 cases will continue to constrain the pace of recovery.
“Gradual improvements in economic momentum are expected until a wider rollout of vaccinations takes place, thus we expect the gross revenue index to remain challenged,” he said.