Philippines to go into recession this year, says HSBC

MANILA, Philippines — British banking giant HSBC expects the Philippine economy  to go into a recession this year amid the surge in  the number of coronavirus disease 2019 or COVID-19 cases.

In a report, HSBC economist Noelan Arbis said the Philippines may enter a recession this year as the gross domestic product (GDP) is expected to contract by seven percent in the second quarter, 4.3 percent in the third quarter and 3.9 percent in the fourth quarter.

The GDP contracted by 0.2 percent in the first quarter, ending 84 straight quarters of positive growth as the economy ground to a standstill due to strict quarantine measures to limit the spread of the virus.

Among Southeast Asian countries, HSBC said Thailand is expected to post the biggest GDP contraction  at 8.2 percent, followed by Malaysia at 6.7 percent, Singapore at 6.6 percent, and Indonesia at 0.9 percent. Vietnam is expected to buck the trend with a GDP growth of 1.6 percent.

As the Philippines eased travel restrictions shifting to a general community quarantine last June 1, the number of positive COVID-19 cases breached the 20,000 mark with close to 1,000 deaths.

Arbis said the  total number of cases in the Philippines and Indonesia are still rising rapidly, adding that  the number of new cases in the Philippines has surged in recent days.

“The number of new infections is the most worrying in the Philippines and Indonesia. The Philippines saw its biggest surge in new cases this week, as testing expands and backlogs are being cleared,” Arbis said.

The economist said the country’s Department of Health is now differentiating between “fresh” cases – confirmed within the last three days – and “late” cases, which are the result of reporting backlogs.

The majority of new cases have come from Central Visayas with 50.6 percent and Metro Manila with 18.8 percent, suggesting that restrictions would likely remain in place in these regions until things improve.

Authorities placed Luzon, including   Metro Manila, in a month-long enhanced community quarantine on March 16 to limit the spread of  COVID-19. The lockdown was extended thrice and shifted to a general community quarantine on June 1.

For 2021, HSBC sees the economy recovering with a GDP growth of 7.4 percent. The Philippines may post a GDP growth of 2.5 percent in the first quarter, 10.1 percent in the second quarter, nine percent in the third quarter and 7.8 percent in the fourth quarter of next year.