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‘PH economy to shrink nearly 20% in Apr-Jun’

By Anna Leah E. Gonzales/The Manila Times

This May 8, 2020 file photo shows the Makati City skyline as seen from Antipolo City, Rizal province. Business activities in the country’s financial center and elsewhere have been at a virtual standstill since the government put Luzon and other parts of the country under quarantine in mid-March to curb the spread of the coronavirus disease 2019. PHOTO BY J. GERARD SEGUIA

The Philippine economy is expected to contract by almost 20 percent in the second quarter and could become one of the “worst-performing economies” this year, according to Capital Economics.

In a report released on Tuesday, the London-based research consultancy firm listed the Philippines as one of three countries — Thailand and India are the other two — whose economies are “likely” to perform the worst in Asia from April to June.

“We think GDP (gross domestic product) [would] have contracted by around 15 [to] 20 percent year-on-year last quarter in these three places,” it added, noting that Thailand has a large tourism sector — one of the hardest hit by the coronavirus disease 2019 (Covid-19) pandemic — and that India and the Philippines endured “long, damaging lockdowns.”

For the Philippines alone, Capital Economics said the economy was estimated to shrink by almost 20 percent in the second quarter after contracting by 0.2 percent in the first.

This forecast was much worse than the 5.7- to 6.7-percent contraction projected by Bangko Sentral ng Pilipinas (BSP) staffers late last month, which was attributed to Covid-19’s impact.

Citing the strict quarantine measures that remain in effect in some parts of the country to curb the spread of the highly contagious respiratory disease, the report said the “[m]onthly data suggest they are having [a] massive economic impact.”

“Manufacturing production volumes were down nearly 45 percent in April and May. Export values recovered slightly in May, but were still down over 35 percent,” it added.

“The high-frequency data that we track suggest the recovery in economic activity has been sluggish. Timely data on the movement of people suggest that, while the economy probably bottomed out in May, activity remains very depressed and is recovering much slower than elsewhere.”

The fiscal response in the Philippines has also been inadequate, according to Capital Economics.

Spending was also not significantly higher in May or June, it said, adding that, based on a report from the Bureau of the Treasury, last month’s primary spending missed its programmed allocation by 8.5 percent.

Capital Economics also expect the Bangko Sentral ng Pilipinas to further cut interest rates by 50 basis points later this year.

The report comes after Capital Economics said on July 16 that the economy could shrink by
8 percent this year because of the prolonged community quarantines imposed in the country and inadequate fiscal support, which would likely delay economic recovery.

This projection is worse than the -3.6-percent forecast of the International Monetary Fund, the -3.8 percent of the Asian Development Bank and the -1.9 percent of the World Bank.

The figure is also a reversal of the 6-percent economic growth posted last year.


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