‘Economy headed toward deeper slump’

Despite improved output in Q3

MANILA, Philippines — Economists are expecting a deeper economic recession this year despite the partial easing of lockdowns to stop the spread of the coronavirus disease 2019 or COVID-19 pandemic.

Dutch financial giant ING Bank sees the country’s gross domestic product (GDP) shrinking further by 11.9 percent in the fourth quarter after easing to 11.5 percent in the third quarter, resulting in a full-year contraction of 10.8 percent.

Nicholas Mapa, senior economist at ING Bank Manila, said government expenditures would contract anew in the fourth quarter as authorities reign in spending to limit pressure on the deficit-to-GDP ratio.

Mapa said Congress has yet to pass the 2021 budget and a delay could make economic recovery next year even more challenging.

“We also highlight the sustained elevated number of COVID-19 daily infections which may increase in the coming months with authorities planning to relax lockdown measures further. The persistent threat of the virus will likely sap consumption appetite and keep investment outlays at bay,” Mapa said.

The economy stalled with GDP shrinking by 10 percent from January to September as Luzon was placed under enhanced community quarantine in the middle of March to slow the spread of COVID-19.

The economy was partially reopened as the National Capital Region shifted to general community quarantine in June but Metro Manila and nearby provinces reverted to modified enhanced community quarantine from Aug. 4 to 18 as COVID-19 cases soared.

Despite implementing the longest and strictest lockdowns in the world, COVID-19 cases in the Philippines breached 400,000 with deaths of more than 7,700.

British banking giant HSBC said the country’s GDP is likely to decline by 9.6 percent this year, exceeding the 4.4 to 6.6 percent contraction set by the Development Budget Coordination Committee.

HSBC economist Noelan Arbis said the easing of mobility restrictions would help raise economic activity in the fourth quarter resulting to a strong rebound next year.

“The absence of a big fiscal boost, in addition to continued domestic and external uncertainties, make us less optimistic on the recovery in the year ahead. We expect real GDP growth of just 5.8 percent in 2021,” Arbis said.

In a virtual briefing, Philippine National Bank equity research head Alvin Joseph Arogo said the country’s GDP is likely to contract by 8.9 percent this year before recovering with a growth of five percent in 2021 and six percent in 2022.

Arogo expects the GDP to contract by six percent in the fourth quarter this year following a growth of 1.5 percent in the first quarter of next year, 8.9 percent in the second quarter and three percent in the third quarter.