Security Bank exec sees 9.9% GDP contraction

MANILA, Philippines — The country’s gross domestic product (GDP) may contract by 9.9 percent this year due to the impact of   COVID-19 pandemic, according to a Security Bank official.

In a virtual forum, Security Bank executive vice president and treasurer Raul Martin Pedro said the Philippine economy contracted by a deeper 11.5 percent in the third quarter due to low mobility and underwhelming government spending.

The country slipped into recession in the second quarter with a record GDP contraction of 16.9 percent from 0.7 percent in the first quarter as the economy stalled when Luzon was placed under enhanced community quarantine in mid-March.

In all, the GDP shrank by 10 percent from January to September after a narrower contraction in the third quarter.

“Economic prospects for the fourth quarter and first quarter next year will likely be challenging,” Pedro said adding that the uptick in virus cases worldwide and renewed lockdowns provide downside risks.

Pedro said the country’s GDP may bounce back strongly with a growth of 7.1 percent in 2021, 5.3 percent in 2022, and 6.1 percent in 2023, buoyed by the rollout of vaccine as well as the recent victory of US president-elect Joe Biden.

However, Pedro clarified that the country’s GDP would recover from pre-pandemic levels only in the middle or second half of 2022.

“What we see is that the central bank has done a lot of heavy lifting, fiscal support is needed in order to spur further economic growth,” Pedro said.

With the impending economic recovery in the fourth quarter and the first quarter of next year, Pedro said the peso may weaken back to the 49 to $1 level.

“You have to credit the central bank, we believe that they are in the market trying to keep the exchange rate rather stable. We expect a weaker peso as the global economy recovers,” Pedro said.