Virus more destructive to economy than initially thought in Q2
MANILA, Philippines — Coronavirus proved to be more damaging to Philippine economy in the second quarter than initially thought.
Gross domestic product (GDP), the sum of all products and services created in an economy, shrank an annualized rate of 16.9% from April to June, worse than the preliminary 16.5% year-on-year slump reported in August, state statisticians reported on Monday.
As a result of latest data, the 6-month contraction likewise exacerbated to 9.3% year-on-year from just 9% originally.
As regularly practiced, the Philippine Statistics Authority reported the revised figure ahead of the release of third quarter data on Tuesday, which economic managers hope would show an easing on the historic slump in previous 3 months when lockdowns crippled economic activity. With restrictions eased, Acting Socioeconomic Planning Secretary Karl Kendrick Chua is optimistic of a bounce-back.
“The economy is actually strong enough tor ecover if we allow it to do so,” Chua said in an economic forum.
Sought for comment, Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines, said the larger dive into recession in the second quarter was not surprising. “Well, these revisions are still in line with what we initially postulated,” Asuncion said in a text message.
The poorer second quarter reading was a result of more data coming in for the real estate sector which contracted 29.7% year-on-year, worse than the original 20.1%. Anemic household consumption, meanwhile, pulled down wholesale and retail trade 13.9%, further down from 13.1% initially.
Larger declines on this sector were nonetheless tempered by some improvements in financial and insurance activities. While still in the negative territory, the segment tempered its slump to 5.4% year-on-year from 6.8% estimated last August when the data was first released.
All eyes are now on the third quarter GDP which Nicholas Antonio Mapa, senior economist at ING Bank in Manila, said would likely come in at 11.4%. If realized, that would be the second deepest contraction on record, directly following the previous three months.
Furthermore, at a double-digit decline anew, the economy would likely fall behind its already downwardly revised target of 6% drop in GDP this year, although that target would be up for review this month.
“We remain miles away from our potential and pre pandemic form. GDP figures in 3Q may actually show 3 out of the 4 sectors in contraction with consumption, capital formation and even government spending all in the red while net exports show an ‘improvement’ as we post a narrower trade deficit,” Mapa said in an e-mail.
“The Philippine economy’s ‘solid economic fundamentals’ may be sidelined for a bit longer,” he added.
Asuncion’s GDP projection for third quarter, meanwhile, was slightly more optimistic at 10.6% annual decline. “Although this shows an improvement, as the economy continues to re-open and general mobility rising higher, GDP growth is still reeling from the heavy impact of the COVID-19 pandemic,” he said.
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