Philippine GDP contracted by 16.5% in Q2; The Philippines is now in a technical recession

The Philippine economy shrunk in the second quarter plunging into recession, following one of the longest and strictest lockdowns in the world to curb the spread of COVID-19.

Second quarter gross domestic product (GDP) was at -16.5 percent, the Philippine Statistics Authority reported Thursday.

“Gross domestic product declined by 16.5 percent in the second quarter of 2020. This is the lowest reported quarterly growth starting in the 1981 series,” National Statistician Claire Dennis Mapa said.

A Reuters poll of 13 economists forecast a range of -18 to -4.2 percent as most analysts have been split on how steep the contraction would be.

Metro Manila, home to roughly a tenth of the Philippines' 100 million population, accounts for a third of the country's gross domestic product while neighboring Southern Tagalog region serves as home to several economic zones and industrial plants.

Metro Manila and Calabarzon, with the rest of Luzon, were placed under strict quarantine after cases of COVID-19 rapidly rose in March.

First quarter GDP contracted for the first time since 1998 due to the impact of COVID-19 and resulting lockdowns.

First quarter GDP has been revised to -0.7 percent from -0.2 percent, data showed.

“I think people should not hold too much expectation for the third quarter which I projected is still negative,” economist Vic Abola told ANC.

“Getting back into the fast lane really depends on how confident people are in reporting for work as health measures are put in place by the firms and how fast we accelerate the infrastructure spending,” he said.

Gradual economic pick up and acceleration can happen once a COVID-19 vaccines becomes available, Abola added.

The coronavirus pandemic will cost the economy P2.2 trillion this year or nearly a tenth of gross domestic product, said the Development Budget Coordination Committee, which is in-charge of setting the government’s macroeconomic goals and policies.

This year’s budget deficit is seen to swell to P1.56 trillion or 8.1 percent of GDP on a massive spending plan to return to an economic growth path in 2021.

The shift back to modified enhanced community quarantine will have "limited economic impact," Bangko Sentral ng Pilipinas Gov. Benjamin Diokno earlier said as analysts said doing so would make it more difficult for businesses to survive the pandemic.

Metro Manila, Cavite, Laguna, Rizal and Bulacan were placed back under modified enhanced community quarantine (MECQ) from Aug. 4 to Aug. 18 after confirmed COVID-19 cases surged.

Since the lockdown was imposed in March, unemployment ballooned 17.7 percent or equivalent to 7.3 million jobless Filipinos. Some 30 percent of businesses have closed permanently or temporarily due to the pandemic, the Department of Trade and Industry said in June.

Aside from local workers, many overseas Filipinos lost their jobs and were repatriated due to COVID-19. Remittances could contract by as much as 5 percent this year, Diokno earlier said.

The Asian Development Bank said remittances in 2020 could shrink by as much as 20.2 percent compared to 2018 numbers in a "worse case scenario."

-ABS-CBN News

Source: Peso Economics