Davao Region’s economy contracts by 7.6% in 2020

Drone shot by Mark Perandos
Drone shot by Mark Perandos

THE economy of Davao Region contracted by 7.6 percent in 2020 due to the Covid-19 pandemic but still remains to be the fifth biggest economy in the country, according to the Philippine Statistics Authority (PSA).

National Economic and Development Authority (Neda)-Davao Director Maria Lourdes Lim said this is "better" than the negative 9.6 percent growth rate of the country.

"Despite the pandemic, Davao Region remained as the biggest economy in Mindanao with a value of P832 billion," Lim said.

PSA-Davao Region Director Ruben Abaro said during the 2020 Economic Performance of Davao Region virtual presser on Thursday, April 29, that this was measured by the Gross Regional Domestic Product (GRDP) and Gross Regional Domestic Expenditure (GRDE).

Abaro said GRDP covers the value of goods and services, produced by the region in a given time, while GRDE is defined as the expenditure of residents of the region in the domestic territory plus their expenditures in other regions including the rest of the world.

He said at 2018 constant prices, the region’s GRDP was valued at P832.1 billion in 2020 from P900.9 billion in 2019.

Ten out of 17 regions in the country have posted lower contraction rates compared to the decline rate recorded at the national level. Davao Region was one of these 10 regions. However, it ranked fifth with the highest per capita GRDP/GRDE at P157,270. It improved its ranking from sixth rank the previous year.

"This economic performance reflected the resilience of Davao Region supported by our strong political leadership, and private sector collaboration," Lim said.

She said the contraction of the region's economy was caused by less business activities and work interruptions due to the movement restrictions implemented by the local government units to curb the spread of the virus.

At -7.6 percent, the economic performance of Davao region in 2020 was the lowest since 2001 while the highest was recorded in 2016 at 9.2 percent in 2016.

Demand side

Lim said the private consumption, which is 66 percent of GRDP or approximately P547 billion, recorded a negative 7.5 percent growth. This translated to around P44.5 billion reduction in private consumption expenditure in the region or an average of P122 million per day.

The Neda official also revealed that the employment rate of the region declined to 82.1 percent in the second quarter of 2020, as 1,087 establishments retrenched 18,470 workers, and 48,701 micro, small and medium enterprises (MSMEs) were affected.

"However, as the economy slowly reopened, employment rate by the end of 2020 improved to 93.2-percent, with unemployment down to 6.8-percent," she said.

With the record decline in Davao Region’s GRDP, all major expenditure items posted decline in 2020 except Government Final Consumption Expenditure (GFCE). Government spending or GFCE of the region increased by 11.9 percent.

"This is on account of the government's higher spending in response to the pandemic, including disbursement for Bayanihan I and II, and other health programs to contain the spread of the virus," Lim said.

Performance of sub-industries

According to the PSA data, the industries with the deepest dive were Other Services with a contraction of 38.2 percent, Accommodation and Food Service Activities with a decline of 34.7 percent, and Transportation and Storage with a drop of 34.5 percent.

Declines were also noted in Mining and Quarrying, Manufacturing, Construction, Real Estate and Ownership of Dwellings, Professional and Business Services, Education, and Human Health and Social Work Activities.

Meanwhile, there were five sub-industries that performed positively in 2020. Topping the list were Financial and Insurance Activities with an expansion of 7.9 percent, Public Administration and Defense with an increase of 6.4 percent, and Information and Communication that grew by 3.9 percent.

Services, which contributed 58.9 percent share to the regional economy, declined by 6.7 percent in 2020 as almost all its sub-industries contracted in 2020. Industry, which accounted for 24.2 percent share, dropped by 14.9 percent mainly attributed to the decreases recorded in Mining and Quarrying, Manufacturing, and Construction.

Agriculture, Forestry, and Fishing (AFF) contributed the least to the total economy of the region with 16.9 percent share.

The drop in the growth of Industry and Services pulled down the growth of the region by a total of 7.8 percentage points while AFF contributed 0.2 percentage point to the region’s total economic performance.

2021 Outlook

Lim admitted the Covid-19 presented an "extraordinary challenge" for the region. But she said the government is taking better risk management.

Among the 6-Point Recovery Program of the National Government for the region includes the timely implementation of the Bayanihan I and II, implementation of the Corporate Recovery and Tax Incentives for Enterprises (Create) law that shall lower corporate taxes, and the implementation of the Financial Institutions Strategic Transfer (FIST) Act that shall address the liquidity problems of firms.

Another risk management approach is the enactment of the Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (Guide) Bill to address solvency problems of firms, fast tracking of the Build Build Program, and timely implementation of project funds.

She added that the growth drivers for 2021 and 2022 are construction, information and communications technology, banks and financial intermediaries, agriculture, and food manufacturing.


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