FMIC sees slower Q3 economic decline
The construction sector, driven by government infrastructure spending and private residential demand, can be expected to lead the upswing especially with the enactment of Bayanihan 2 Act which grants a one-time 60-day grace period for loan repayments.
Philstar.com/ Irish Lising, file
FMIC sees slower Q3 economic decline
Czeriza Valencia (The Philippine Star) - October 20, 2020 - 12:00am

MANILA, Philippines — A slower decline in economic output of not more than five percent can be expected in the third quarter of the year as signs of recovery continue to be seen in the industry sector, said the investment banking arm of the Metrobank Group.

In its latest Market Call report, First Metro Investment Corp.(FMIC) and University of Asia and the Pacific (UA&P) Capital Markets Research said the industrial sector could be expected to lead the pace of recovery in the coming months as the government continues to relax quarantine restrictions and commits to open up more of the economy in the future.

The construction sector, driven by government infrastructure spending and private residential demand, can be expected to lead the upswing especially with the enactment of Bayanihan 2 Act which grants a one-time 60-day grace period for loan repayments.

Increased spending on healthcare infrastructure by the government amid the pandemic is expected to accelerate for the rest of the year to strengthen the capacity of the sector to respond to the public health crisis.

Manufacturing conditions should continue improving although at a slower pace as the government relaxes quarantine restrictions on production activities and mobility of people.

The government also recently signaled willingness to revive the mining sector to create more jobs in rural areas.

“All told, a GDP decline of not more than five percent in Q3 would indicate a wider coverage in the recovery stage,” said the report.

Economic performance for the third quarter for the year will be reported by the Philippine Statistics Authority (PSA) in the first week of November.

In September, the Purchasing Managers’ Index (PMI) returned to expansion territory, the first time since February.

Official manufacturing data, meanwhile, showed that output declined at a slower pace in August even with the two-week reimposition of a strict lockdown in Metro Manila and surrounding areas during the month.

This was a continuation of the trend in July, indicating recovery in the sector amid the health crisis.

“With the easing of restrictions on firms and public transportation in mid-September, the rally may gain some traction in Q4,” said FMIC and UA&P.

Growth in consumer prices, meanwhile, can be expected to remain muted with stable food and crude oil prices, and is expected to fall below two percent early in 2021.

Still for the full-year 2020, average inflation rate will likely be subdued at 2.4 percent.

“A sprinkling of positive news and less negative economic data suggests that the economy is well past the bottom and is slowly gathering momentum,” said the report.

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