Philippine Markets Newsletter

MONDAY MACRO: At nearly 18%, this metric has reached record highs, triggering more concerns about the Philippine economic recovery.

June 22, 2020

In its attempts to contain the spread of the novel coronavirus, the Philippine government implemented community quarantines in major cities.

Since this type of government intervention is the first for the country, it’s unlikely businesses would have prepared for this. Without revenue-generating opportunities or external support, numerous businesses have had to lay off employees or shut down completely.

This economic metric jumped to levels not seen before, leaving many concerned about the Philippine economy’s ability to bounce back.

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The Monday Macro Report
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Even until now, major cities in the Philippines are still under community quarantine. Transportation is still limited, and most businesses are not allowed to operate at full capacity.

Government projects such as the Build, Build, Build program were also halted, displacing many workers in the process.

Some businesses were able to transition to a work-from-home setup during the quarantine period, but others were not as fortunate.

The Philippine Statistics Authority (PSA) estimated that about 7.3 million Filipinos were rendered jobless due to the pandemic. Unemployment rate reached an all-time high of 18% in April 2020, almost two decades since its last peak of 14% in 2002.

The report also showed that two-thirds of workers depend on salaries and wages, while the remaining third is self-employed.

The number of Filipinos with jobs fell to 82% of the market, a significant drop from 95% at the start of 2020. In addition, of the 33.8 million Filipinos employed, 13 million of them had jobs but were not able to work.

The number also includes thousands of OFWs who send billions of dollars collectively in remittances to the country.

With this historically high unemployment rate, many are concerned about the country’s ability to recover from this economic crisis. No income means no spending power, which also means no consumption to drive economic activity and growth.

Due to this, investors and analysts are expecting further economic contraction in Q2 2020, when most of the stricter measures for community quarantine were implemented.

Although consumer behavior might not return to the way it was pre-COVID-19, the worst case scenario of prolonged recession and high unemployment is unlikely.

As we discussed in our June 15th Monday Macro report, the aggregate return on assets (ROA) in the Philippines will likely remain above the cost of capital.

While there is an expected 2% decline in aggregate Uniform earnings this year, the country’s largest companies have conservative balance sheets that can protect them from bankruptcy or from defaulting on their debts.

As long as the central bank’s aggressive monetary policies remain effective, the risk of the Philippines recovering later rather than sooner is not high.

About the Philippine Market Daily
“The Monday Macro Report”

When just about anyone can post just about anything online, it gets increasingly difficult for an individual investor to sift through the plethora of information available.

Investors need a tool that will help them cut through any biased or misleading information and dive straight into reliable and useful data.

Every Monday, we publish an interesting chart on the Philippine economy and stock market. We highlight data that investors would normally look at, but through the lens of Uniform Accounting, a powerful tool that gets investors closer to understanding the economic reality of firms.

Understanding what kind of market we are in, what leading indicators we should be looking at, and what market expectations are, will make investing a less monumental task than finding a needle in a haystack.

Hope you’ve found this week’s macro chart interesting and insightful.

Stay tuned for next week’s Monday Macro report!


Angelica Lim
Research Director
Philippine Markets Daily
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