Philippine economy likely grew by 3% in Q1 — think tank

MANILA, Philippines — Economic growth likely slowed down to three percent in the first quarter of the year, the slowest in 10 years, after multiple economic shocks related to the coronavirus pandemic hit the Philippine economy, said London-based Capital Economics.

In a new research brief, the think tank said that while the Philippine economy still grew in the first quarter, a deeper contraction of as much as 13.5 percent can be expected in the second quarter.

The initial hit from the pandemic in the first three months of the year was concentrated in the tourism industry as travel bans were enforced worldwide to curb the spread of the new coronavirus that causes the COVID-19 disease.

Domestic demand was hit later in the quarter after the enforcement of the lockdown in Luzon, the country’s main island that accounts for 70 percent of gross domestic product (GDP).

“GDP growth is likely to have slowed down to three percent in Q1, down from 6.5 percent in the final quarter of last year,” Capital Economics said.

“The Q2 figures are likely to be much worse. While lockdown restrictions have been eased in parts of Luzon recently, most of the island, including the economic powerhouse of Metro Manila, will remain under lockdown until at least 15th of May.”

The restrictions to mobility enforced in the country is among the most severe in Asia as the domestic health sector struggles to cope with the surge in the number of confirmed COVID-19 cases.

“Figures from Google’s Community Mobility Reports similarly suggest that the lockdown has had a bigger impact on daily life than anywhere else in the region,” Capital Economics said.

“Overall, we expect a very severe contraction in GDP of around 13.5 percent year-on-year in Q2.”

Recovery can be expected to occur in the second half of the year as restrictions on domestic economic activity are lifted, the firm said.

External demand should also start to pick up as lockdowns worldwide are eased.

Because of the economic beating in the first half, Capital Economics maintained its previous forecast that the Philippine economy would contract by four percent this year, its worst performance since 1984.

The firm, however, noted that this forecast is “much lower than the consensus.”

Acting Socioeconomic Planning Secretary Karl Chua said growth in the first quarter can still be expected to be positive, although slower, as several economic shocks, both domestic and external, battered the economy.

These include the eruption of Taal Volcano in January, the steep decline in tourists following travel bans, and the start of the Luzon-wide lockdown in mid-March.

Chua likewise sees the economy recovering in the second half of the year as lockdown restrictions are lifted.

The Philippine Statistics Authority (PSA) is set to announce the country’s growth performance for the first quarter on May 7.