Q2 growth to be ‘much worse’

Growth of the Philippine economy would contract further in the second quarter of 2020, economists projected on Thursday, after the government reported that growth in the first three months sank to 0.2 percent.

In a report released after the Philippine Statistics Authority announced the January-to-March gross domestic product (GDP) data — which it attributed to slower household consumption as a result of the Luzon-wide enhanced community quarantine — London-based Capital Economics said “second quarter figures are likely to be much worse.”

Alex Holmes, the macroeconomic research firm’s economist for Asia, said the first-quarter figures “suggest the lockdown is having a severe effect on economic activity.”

“Overall, we expect a very severe contraction in GDP of around 16 percent year-on-year in Q2,” he added.

According to him, contributors to the decline included the slump in external demand, the unlikely recovery of the tourism sector and lower remittances.

“Provided [that] the outbreak is contained, a recovery should follow in the second half of the year as restrictions on domestic economic activity are lifted,” Holmes said, referring to the spread of the coronavirus disease 2019 (Covid-19) in the country, which the government was trying to curb by imposing the lockdown in mid-March.

“External demand should also start to pick up, as lockdowns in the rest of the world are eased. But we still expect the economy to shrink sharply over the year as a whole,” he added.

“Given [Thursday’s] data, we are downgrading our 2020 GDP forecast from -4 percent to -6 percent.”

In a separate report, ANZ Research expects economic growth to drop further in April to June.

“First-quarter growth was the lowest since 1998, with both the domestic and external sectors taking a sizable hit. It is likely [that] growth falls even further in Q2, reflecting the full impact of the Covid-19-related lockdown,” it said.

Meanwhile, an analyst from ING Bank Manila warned that the Philippines would likely experience a recession.

“It’s all but official. The Philippines [would] likely post a technical recession in 2020…as [first-quarter] GDP [showed] how detrimental the lockdown [was] for the economy,” ING Bank Manila senior economist Nicholas Antonio Mapa said.

“Given the current hole left by Covid-19 in the economy, we are expecting the government to double up efforts to plug the gaps by way of increased spending as the private sector appears to have lost all the punch from its consumption arm,” he added.