FMIC sees Q1 GDP growth lower by 0.8 ppt
Czeriza Valencia (The Philippine Star) - March 10, 2020 - 12:00am

MANILA, Philippines — Economic growth in the first quarter of the year may be reduced by as much as 0.8 percentage point (ppt.) because of the lingering effects of the Taal Volcano explosion and the transmission of the COVID-19 disease, said First Metro Investment Corp. (FMIC).

In its latest Market Call report, the investment banking arm of the Metrobank Group and the   University of Asia and the Pacific (UA&P) said despite the projected reduction in economic output of between 0.4 to 0.8 ppt for the first quarter, growth will still be robust enough to make the country among the top performers in the ASEAN region.

“The negative impact of the Taal Volcano eruption and Metro Manila consumers avoiding malls with the lingering COVID-19 impact on tourism may only result in a 0.4 to 0.8 percent age point reduction in GDP growth in Q1-2020 but still robust enough to be a top performer in ASEAN-6,” the report said.

To support the economy, FMIC said the Bangko Sentral ng Pilipinas (BSP) may cut policy rates again by another 25 basis points this month.

As a preemptive response, the BSP slashed key rates by 25 basis points last month.

Economic activity can be expected to return to a fast growth trajectory in the second half of the year as it will be supported by renewed strength in domestic demand, infrastructure build up and investment spending.

“The economy’s return to fast growth in H2 should be supported by resurgent domestic demand, infrastructure and consumption,” said the report. “Higher residential and construction of various PPP projects, along with the improvement in manufacturing activities and national government spending should provide the added impetus,” FMIC said.

It noted that the prevailing slump in global oil prices will help temper the economic fallout caused by the explosion of Taal Volcano and the still continued spread of the coronavirus disease.

Should the contagion shows signs of easing over the summer season much the 2003 SARS, economic activity may start to recover in the second quarter of the year.

“Assuming that it ends in the summer like SARS, we see the economy roaring back starting Q2 ramped up infrastructure and expansive private construction and consumer spending should lead domestic demand back into the driver seat,” said FMIC.

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