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The Philippine economy continued to contract for the third consecutive quarter, albeit at a slower pace compared to the second quarter, as lockdown restrictions were further loosened amid the 2019 coronavirus disease (COVID-19) pandemic.
The economy remained in recession, as gross domestic product (GDP) contracted 11.5% in the third quarter after falling 16.9% in the second quarter, data from the Statistics Authority showed Tuesday. of the Philippines (PSA). GDP grew 6.3% in the third quarter of 2019.
A Business world A survey of 19 economists last week showed a median forecast of a 9.2% drop in the third quarter.
So far this year, the GDP performance has been -10%. The government expects the economy to contract between 4.5% and 6.6% this year.
The government gradually lifted closure restrictions starting in June, although Metro Manila and nearby areas returned to a strict closure for two weeks in August to curb the increase in COVID-19 cases.
Household spending remained a drag in the third quarter, contracting 9.3% year-on-year in the third quarter compared to expanding 6% a year ago. However, this was slower compared to the 15.3% drop in the second quarter.
Private investment, which is represented in the data as capital formation, plummeted 41.6% in the third quarter compared to falls of 53.7% and 0.1% in the second quarter of 2020 and the third quarter of 2019, respectively.
Exports of goods and services decreased 14.7% compared to the 1.8% growth last year. However, this was slower than the 35.8% drop in the second quarter. Likewise, imports fell 21.7% compared to falls of 37.9% in the previous quarter and 0.1% in the third quarter of 2019.
Public spending grew at a much slower pace, 5.8% in the third quarter, compared to 21.8% in the previous quarter and 8.8% last year.
On the supply side, the services sector registered a 10.6% drop in the third quarter, slower than the -17% observed in the second quarter and the 7.3% expansion in the third quarter of 2019 .
Likewise, the industrial sector fell 17.2% compared to -21.8% in the previous quarter and the rise of 5.4% a year ago.
On the other hand, agriculture registered a growth rate of 1.2%, but it was slower than the 1.6% in the second quarter and 3% last year.
Gross national income, the sum of the nation’s GDP and net income received from abroad, saw a 13% drop in the third quarter compared to a 5.2% growth in the three comparable months of 2019.
MIXED PERSPECTIVE
However, the government said that the economic contraction had already bottomed out in the second quarter and that “the worst is over.”
“The lower GDP contraction of 11.5% in the third quarter from a contraction of 16.9% in the second quarter indicates that the Philippine economy is improving. The path is clearer to a strong rebound in 2021 ”. The acting secretary of Socioeconomic Planning, Karl Kendrick T. Chua, was quoted in a statement by the National Authority for Economy and Development.
In an email, University of Asia and the Pacibec Senior economist Cid L. Terosa said that economic performance in the fourth quarter “will be better” due to the easing of the blockade restrictions, as well as the beginning of the holiday seasons that would revitalize production and consumption activities.
In another email, the economist of the Colegio de San Juan de Letrán, Emmanuel J. López, said that the economy is expected to recover in the fourth quarter.
“[Fourth-quarter] GDP is expected to show an appearance of normality … [with a GDP performance] of at least 2-4%, ”he said.
On the other hand, some economists were not so optimistic.
“With unemployment still high at 10% and negative business sentiment according to the Bangko Sentral ng Pilipinas (BSP), we do not expect a rapid rebound in growth with GDP remaining in negative territory until a base effect-induced rebound in [the second quarter of 2022]ING Bank NV Manila senior economist Nicholas Antonio T. Mapa said in a note.
“Household consumption, which generates most of the economic activity, will suffer in the coming months due to the challenging labor market, while bank loans slowed to single-digit growth, indicating a slowdown. parallel in the investment boost, “he added.
Mr. Mapa also noted the “persistent threat” from the coronavirus pandemic, citing the high and sustained number of daily infections that may increase due to closed closures.
On a separate note, HSBC global research economist Noelan C. Arbis said that third-quarter GDP performance “didn’t look much different from the second-quarter figures.”
“Private consumption and fixed investment continued to slow growth, albeit to a lesser extent, while net exports and public spending contributed positively, similar to the previous quarter,” Arbis said, adding that this year’s economic contraction “probably It will exceed ”Expectations of the economic managers.
“The main conclusion may be that [the] the figures suggest … this year’s economic contraction is likely to exceed the government’s forecast of -6%. We expect GDP for the full year to decline 9.6% in 2020, ”he said.
For Capital Economics Asian economist Alex Holmes, Philippine economic output “is unlikely to return to its pre-crisis level until the end of next year.”
“A big driver of the rally was the easing of strict lockdown restrictions. But since the virus is not yet under control, a further reduction in containment measures will take longer, which means that life is unlikely to return to normal anytime soon, “he said.
“What’s more, the economic scars of the recession, including business insolvencies, weaker household balance sheets and high unemployment, will weigh heavily on demand for many months to come. On the external front, while merchandise exports grew again in September, the second waves of the virus in the United States and Europe have made the outlook more uncertain. The tourism industry is likely to remain on its knees for some time, ”he added.
NECESSARY ENCOURAGEMENT
In reaction to the continuing contraction in household spending in the third quarter, the Chairman of the House Ways and Means Committee and the representative of Albay, José Ma. Clemente S. Salceda reiterated their call for another round of transfers direct cash.
“If disposable income falls deeply, below expectations, we should be open to a direct, universal cash transfer. There should be some bethere is room in the balance since we exceeded our revised revenue targets this year, ”Salceda said in a statement.
Salceda, who also co-chairs the COVID-19 House Defeat Committee’s economic stimulus and recovery group, has emphasized the need to expand the third round of the Social Improvement Program in the 2021 budget “to a more universal level.”
“In 2021, the stimulus measures will work because the mobility restrictions will be lower than in 2020, so we should not be afraid to spend more. I estimate that we have at least P150 billion more in befiscal space for the 2021 budget… ”, he said.
The House of Representatives transmitted to the Senate on October 27 its beFinal version of the 2021 General Appropriations Bill, containing P4.5 trillion spending items for next year’s budget. Senate President Vicente C. Sotto III has said the proposed budget will become law before Christmas except for “unforeseen circumstances.” – Michelle Anne P. Soliman with tickets from Kyle Aristophere T. Atienza
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