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By Beatrice M. Laforga, Reporter
The Philippines’ gross domestic product (GDP) probably contracted more slowly in the fourth quarter due to a rebound in economic activity as lockdown restrictions were further eased and higher consumer spending during the Christmas season.
A Business world The survey of 18 economists and an institution last week showed an average contraction of GDP of 8.5% for the fourth quarter and 9.5% for the whole year. Economic production grew 6.7% in the fourth quarter of 2019 and 6% during the year.
The quarterly forecast is less severe than the 11.5% drop observed in the third quarter and the 16.9% contraction in the second quarter.
The contraction of the GDP for the whole year, if it materializes, would be the first fall since 1998 (0.5%) and the steepest registered according to the available data dating from 1947. It would surpass the fall of 7% and 6.9% in 1984 and 1985, respectively.
The survey’s median estimate of a 9.5% drop for 2020 compares with the 8.3% projected by the International Monetary Fund, 8.1% by the World Bank and 8.5% by the Asian Development Bank . Fitch Ratings and Moody’s Investors Service gave contraction estimates of 8.5% and 8.7%, respectively, while the ASEAN + 3 Macroeconomic Research Office sees the GDP drop at 7.6%.
The Philippine Statistics Authority (PSA) will release GDP data on January 28, one day after the release of the latest quarterly data on agriculture and the international trade deficit for December on January 27.
Economists said the decline in GDP likely eased in the fourth quarter due to further easing of lockdown restrictions and higher consumer spending during the holidays. Positive news about the development of a 2019 coronavirus disease (COVID-19) vaccine also likely helped fuel consumer scam.to bedence.
“We project that GDP decreased at a slower rate of 6% year-on-year in 4Q20 from 11.5% year-on-year in 3Q20. In our estimates, we consider looser overall quarantine restrictions, which likely resulted in less moderate consumer spending, ”said Alvin Joseph A. Arogo, vice president and head of the equity research division at Philippine National Bank (PNB) , through e. -mail.
“Consumer confidence was likely also boosted by the positive developments related to the COVID-19 vaccine. Our GDP forecast for the full year 2020 is -8.9% year-on-year ”, he added.
Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said fourth-quarter GDP may have improved slightly from previous quarters due to “the rebound in both business and consumer spending for the holiday season. , which also implies more economic activities that created more jobs. “Consumer spending represents at least 70% of the economy.
Ricafort said the seasonal surge in remittances from Filipino Overseas Workers (OFW) ahead of the Christmas and New Year holidays also helped boost economic activity.
The latest central bank data showed OFW remittances increased 0.3% to $ 2.379 billion in November, the third consecutive month of growth. This brought year-to-date remittances to $ 27.013 billion, 0.8% less from year to year.
However, a series of strong typhoons in Luzon reduced consumer and business sentiment and inadequateffiscientist to begovernment fiscal impulse, weighed down on fourth quarter GDP.
“We expect a 12.2% year-on-year contraction in GDP in 4Q2020 compared to 4Q2019; This translates into a decline in FY2020 GDP of 10.6% compared to FY2019, ”said Emilio S. Neri, Jr., Principal Economist at the Bank of the Philippine Islands.
The main reasons for these estimates include major typhoons and Floridafloods in October and early November, which had a signito beit cannot affect the economic performance in Cagayan Valley and the economic performance of eastern Metro Manila, he said. “While it was not as severe as the Ondoy and Pepeng difficulties in 2009, we believe this had a substantial impact on consumer behavior and investment in Metro Manila until the end of November,” Neri said.
Kanika Bhatnagar, an economist at ANZ Research, said the recovery in the Philippine economy had been slow due to “inadequate fiscal execution and a weak labor market.”
In an email, Bhatnagar said that consumer spending could have been affected by the high unemployment rate, while investments were slow as banks restricted lending.
“The absence of capital formation is also likely to play a major role in overall GDP figures, which is likely to post another surprising double-digit drop, as indicated by the sharp decline in imports of capital goods for the second half of 2020.” , Nicholas Antonio T. Mapa, senior economist at ING Bank NV Manila Branch, said.
“Poor road vehicle sales year-on-year, the cancellation of aircraft orders and a possible total slowdown in new construction projects point to a severe contraction for this sector,” he added.
Industry data showed that car sales reached 27,596 units in December, down 18% from a year ago. Sales for the whole year stood at 223,793 units, 39.5% less than in 2019.
Faster inFloridaThe acceleration, especially in food and fuel, during the period also hampered the recovery of the economy, according to the dean of the Graduate School of the Colegio de San Juan de Letrán, Emmanuel J. López.
Headline inflation accelerated to a 22-month high in December, rising faster to 3.5% from 3.3% in November, due to an increase in the prices of food and non-alcoholic beverages. This brought the average inFloridaby 2020 at 2.6%, within the target of 2-4% of the Central Bank of the Philippines.
Noelan Arbis, an economist at Hongkong and Shanghai Banking Corp. Ltd. (HSBC), which expects GDP to have contracted 9% in the fourth quarter and 9.7% for the whole year, said economic activity could have recovered amid relaxed quarantine restrictions. in the last three months of 2020, while financial markets continued to be supported by the accommodative stance of the central bank.
“The outlook for 2021 depends on the government’s handling of the pandemic and the launch of the vaccine. We expect GDP growth of 6.5% in 2021, unless a new wave of COVID-19 infections and vaccine inoculations begins sometime in the first half of the year, ”Arbis said.
The worst-hit sectors such as tourism and commercial aviation are expected to experience prolonged weakness and could drag down the economy’s recovery, said IHS Markit Asia Pacific economist Ravis Biswas, who gave an estimate of GDP. contraction of 6.3% for the fourth quarter and a drop of 8.9%. by 2020.
“The outlook for 2021 is for a strong economic recovery based on a gradual rollout of COVID-19 vaccines during 2021 in the Philippines, as well as a strong economic rebound in key export markets such as the United States, China and the EU. IHS Markit expects the Philippine economy to recover strongly in 2021, growing at a 7.7% rate year-on-year, ”he added.
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