Philippine economy shrinks faster than initially thought in Q1

The Philippine economy lost the property sector as a growth engine in the first three months, sinking deeper into contraction and cementing expectations of a bigger crash in the second quarter.

Gross domestic product (GDP) shrank an annualized 0.7% in the first three months, worse than the preliminary 0.2% year-on-year contraction reported last May, the Philippine Statistics Authority (PSA) reported on Wednesday.

The downward adjustments, which are regularly done to reflect late data arrivals, increase the likelihood of a bigger economic collapse, and a recession, in the second quarter when state-initiated lockdowns to control the pandemic were at their peak.

PSA will released initial readings on the second-quarter GDP on Thursday, 9 a.m., to be followed by a briefing of economic managers at 11:30 a.m.

Sought for details, Vivian Ilarina, assistant national statistician, said in a text message the “top contributors to the downward revision” were the real estate and human health and social work sectors, as well as other services including arts and entertainment.

Broken down, the biggest revision was made on the value of property and ownership dwellings created in the first quarter. The pandemic tempered demand for shelters, especially with thousands of migrant workers, among the biggest homebuyers, coming home jobless.

From 2.2% growth last May, real estate actually dipped 2.3% year-on-year in the January-March period, data showed.
   
Other services, meanwhile, shrank 10.6% in the first quarter, worse than the initial reading of 7.6%. Under this segment, arts and entertainment services, production of which had been limited during lockdowns, slid nearly a tenth year-on-year. This was a bigger decline than the 6.4% slump estimated last May.

On the flip side, human health and social work activities grew 4.7% year-on-year as of March, albeit slower than the 9.2% original estimate, due to a decline in private health services amid the pandemic.

MECQ to deal heavy damage
Nicholas Antonio Mapa, senior economist at ING Bank in Manila, said a worse first-quarter performance cemented views that lockdowns, even for small periods, can be catastrophic economically. The first-quarter data only captured the first two weeks of the Luzon lockdown in March.

A “very severe” second-quarter GDP slump is already a given, Mapa said, adding that it’s the third quarter that is crucial especially after the government re-imposed restrictions in Metro Manila, Laguna, Bulacan, Rizal and Cavite for 15 days just when the economy is gaining steam.

“The return to (modified enhanced community quarantine) in August will have a negative impact on third-quarter GDP and overall economic momentum for the balance of the year,” he said in an e-mail.

-Ian Nicolas Cigaral (Philstar.com)

Source: Peso Economics