The Washington-based Institute of International Finance (IIF) has further downgraded its economic outlook for the Philippines as full-year contraction is seen hitting a bigger 3.9 percent from 3 percent previously, no thanks to the resumption of stricter COVID-19 lockdown in areas accounting for two-thirds of the economy.
On Wednesday, or a day before the government will report on the second-quarter gross domestic product (GDP) performance, the Philippine Statistics Authority (PSA) said that the economy shrank by a faster 0.7 percent year-on-year during the first quarter of 2020.
Last May, the PSA announced first-quarter GDP contraction of 0.2 percent due to the eruption of Taal Volcano and the tourism sector’s weaker revenues at the onset of the COVID-19 pandemic.
“The growth rates of net primary income (NPI) from the rest of the world, and gross national income (GNI) recorded downward revisions from -4.4 percent to -5.9 percent, and from -0.6 percent to -1.2 percent, respectively,” the PSA said.
IIF Asia economist Yuanliu Hu said in an e-mail that projections for second quarter GDP would show a steep dive of 8.1 percent year-on-year “due to bad economic data” and continued rise in COVID-19 cases. Bad economic data included a drop in consumption, weak production and trade and a declining volume of remittances.
“The third-quarter will be hurt as well given the new lockdown measures,” said Hu.
“I expect a 7-percent recession. The situation will only be better in the fourth quarter, but still negative [GDP],” Hu said.
The government had projected a 2-3.4 percent GDP contraction in 2020, but the economic team is currently reviewing this estimate as the second-quarter outturn was expected to be worse than expected at the height of the most stringent COVID-19 lockdown in the region which sent to paralysis at least 3/4 of the economy.
In an Aug. 4 note to clients, Morgan Stanley Research said that despite a resurgence of COVID-19 infections in the Philippines, India and Indonesia, Asia as a whole was en route to gradual recovery, not a double-dip.
“In economies where daily COVID-19 cases have risen to new highs (such as India, Indonesia, the Philippines and Hong Kong), that has not stopped growth momentum from recovering further in most cases,” Morgan Stanley said, even as “COVID-19 risks are still most significant in India, Indonesia and the Philippines.”