Economic slump to persist next year – Capital Economics

MANILA, Philippines — The economy may not return to pre-pandemic growth trajectory by next year because of still rising infection rates and weakness in the recent jobs market and industrial data, according to  Capital Economics.

In a report, the London-based think tank said the recent reimposition of the two-week lockdown in Metro Manila and surrounding growth centers, as well as the continued increase in the number of COVID-19 cases, likely undid any recent gains.

“Altogether we think the economy will contract by eight percent this year, with gross domestic product (GDP) unlikely to return to its pre-crisis level until mid-2021,”  the research firm said.

“A long and strict lockdown meant the Philippines suffered one of the biggest falls in GDP in the region in the second quarter.  The most recent data suggest that it is also experiencing one of the slowest recoveries.”

It also cited the latest employment data showing still elevated levels of unemployment at 10 percent, translating to around 4.6 million of jobless Filipinos in July.

Industrial output continued to decline in July, although at a slower pace with the volume and value of production contracting by 11.9 percent and 14.8 percent, respectively.

“A renewed two-week lockdown in Manila in August and climbing infection rates are likely to have scuttled any improvements more recently,” Capital Economics said.

After being placed under a looser community quarantine  in June and July, the National Capital Region (NCR), Cavite, Laguna, Bulacan and Rizal were reverted to the more severe modified enhanced community quarantine (MECQ) from Aug. 4  to Aug. 18.

This was done in response to the plea of medical workers for a “time out” to slow down the transmission of the virus and prevent the collapse of the health system.

These areas have been returned to the less strict general community quarantine afterwards.