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The Philippine economy shrinks 11.5% in the third quarter, down from record
Manila, Philippines (UPDATE 11:47 am, Nov 10) – The Philippine economy slipped back into negative territory in the third quarter, but the collapse moderated from a record drop of the previous 3 months after closures were relaxed, businesses reopened and people were allowed to leave.
Gross domestic product (GDP) plunged 11.5% year-on-year in the July-September period, a reversal of growth from 6.3% last year, but a moderate decline from a record high of 16.9% in the second quarter.
While a further decline was expected, that GDP, the sum of all the products and services created in an economy, still remained in a double-digit decline reflected the difficult rise of the Duterte administration to the previously envied Philippines growth story. that the pandemic pushed back economic gains. .
The path to full rebound would be challenging. During the first 9 months, state statisticians said that GDP contracted 10% year-on-year, far worse than the government’s targets of up to a 6.6% drop, although economic managers have revised that figure, following the latest data. .
But acting secretary for socio-economic planning, Karl Kendrick Chua, was optimistic. “The lower GDP contraction of 11.5% in the third quarter… indicates that the economy is improving. The path is clearer to a strong rebound in 2021, “he said in a briefing.
But analysts interviewed before the data was released on Tuesday painted a bleaker picture for the economy that was once considered the fastest-growing Southeast Asia. Rajiv Biswas, Asia Pacific Chief Economist at IHS Markit, said there remained a “continued high impact of the pandemic and restrictive lockdown measures” on the economy.
Kanika Batnagar, an economist at ANZ Bank, agreed. “While the Philippine GDP rebounded in the third quarter (third quarter), the pace was slow due to weak private consumption,” he said in an email. ANZ’s projected GDP would contract 10.2% year-on-year in the last quarter.
While general restrictions have been relaxed since June, in the past 3 months, Metro Manila and neighboring areas in Cavite, Bulacan, Rizal and Laguna were returned to tighter controls for 15 days in August. As a result, Chua said that the contraction still in double digits “is not surprising” given that, together with Cebu, the areas where the blockade was reinforced represented 60% of the economy.
More generally, the impact of the pandemic persisted on all economic fronts, although it was moderate. With people still scared to go out, household spending fell 9.3% year-on-year last quarter from a record 15.3% drop in the second quarter and 6% growth in the same period in the previous quarter. last year.
Exports fell 14.7% annually from the 35.8% drop in the last quarter and the 1.8% expansion last year. Imports fell 21.7% year-on-year, compared to a 0.1% drop a year ago and a 37.9% drop in the April-June period.
Growth in public spending slows
However, an outlier in the improvement of the figures was public spending. While still growing, growth in state expenditures slowed to 5.8% year-on-year from 21.8% in the previous 3 months. Construction fell 37.1% year-on-year, also worse since the 36.5% drop in the second quarter.
“Our track record shows that we can catch up on spending,” Chua told reporters, citing the increase in spending last year despite budget approval delays.
There were also problems on the supply side. While agriculture was once again the only growth engine with a 1.2% expansion, Chua acknowledges that the trend is at risk from four typhoons that hit farmlands last month, resulting in billions of dollars. pesos in damage to crops.
Meanwhile, the industry and services sectors fell 17.2% and 10.6% year-on-year, respectively, decreasing with respect to the previous quarter.
Last resource
The good news is that the Philippines is unlikely to revisit the widespread lockdowns to control the pandemic. Chia said Monday that such a tactic will be a “last resort” if cases of the deadly virus re-emerge. Over the past month, daily coronavirus cases had seen a downward trend, albeit in part as a result of low testing after the Philippine Red Cross halted diagnosis for days due to unpaid government debts.
That said, the road to recovery would be long and winding as consumers, now allowed to go out to dinner and shop, have stayed home for fear of contracting the virus. Lawmakers are betting on a vaccine as a long-term solution, but Duterte’s projection that it would be available later this year has been shown to be false.
Overnight, Pfizer reported 90% effectiveness of its inoculation in development, but Carlito Gálvez, the country’s vaccine czar, said immunization is not expected until late 2021 at the earliest.
“Given the severe recession in the second quarter, the loss of many small businesses and the high unemployment rate, it will take several more quarters to complete the recovery period,” said Steve Cochrane, an analyst at Moody’s Analytics, in an email. .
“We anticipate that it could be as late as mid-2022 before the Philippines GDP, in real terms, rises above its Q4 2019 level again,” he added.
Editor’s Note: Full updates, including quotes from Sec. Chua, analysts, data breakdown, and chart.
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