Economists see narrower GDP decline in Q3

The gradual reopening of the Philippine economy eased the downturn in July to September such that the majority of economists and financial institutions expect third-quarter gross domestic product (GDP) shrinking by a narrower single-digit rate.

Of the 18 forecasts collected by the Inquirer last week, 13 projected GDP contraction below 10 percent year-on-year during the third quarter. The range across these forecasts were between a low of 7.1-percent drop and a high of 11.8 percent—nonetheless all below the record 16.5-percent slide posted in the second quarter.

Most of these economists estimated the third-quarter domestic output to have increased by about 8 to 12 percent compared to the trough during the second quarter, when the most stringent COVID-19 lockdown in the region put a halt to three-fourths of the economy.

Budget Secretary Wendel Avisado, who chairs the Cabinet-level Development Budget Coordination Committee (DBCC), on Friday said the DBCC would meet to revisit its macroeconomic assumptions after the Philippine Statistics Authority’s third-quarter GDP report on Tuesday, Nov. 10.

The most optimistic third-quarter GDP projection was made by Ateneo de Manila University’s Alvin Ang, followed by Morgan Stanley Research’s forecast of a 7.8-percent year-on-year decline.

“High frequency proxy indicators for private consumption such as passenger car sales, consumer goods imports and remittances have bounced off the lows from the second quarter. Meanwhile, fixed capex likely saw a less bad decline as imports of capital goods, imports of raw materials and intermediate goods, and commercial vehicle sales all recorded second-order derivative improvement. On the external front, goods exports also fared better,” Morgan Stanley Research said.

Security Bank’s Robert Dan Roces and University of Asia and the Pacific’s Victor Abola shared the same forecast of an 8-percent contraction even as the UA&P professor said “the generalized lockdown in Metro Manila and four nearby provinces and the unavailability of public transportation have made it difficult to have a strong rebound,” referring to the two-week revert to stricter quarantine in August in areas accounting for half of the economy after COVID-19 infections surged and medical front-liners sought some time out.

“We project a gradual recovery henceforth as some sectors still remain challenged and business and consumer confidence still remain largely down plus tourism is unlikely to revive anytime soon. Uncertainties still prevail in this ‘postlockdown, prevaccine’ phase, with the need to complement existing monetary policy with government spending and a larger fiscal stimulus,” Roces said.

Sun Life Financial’s Patrick Ella projected a third-quarter GDP decline of 8.5 percent; Moody’s Analytics’ Steven Cochrane, 8.6 percent, and Banco De Oro Unibank’s Jonathan Ravelas, 8.7 percent.

The other economists who had forecasts of single-digit year-on-year GDP contraction in the third quarter were Rizal Commercial Banking Corp.’s Michael Ricafort (9 percent), Oxford Economics’ Makoto Tsuchiya (9.2 percent), Citi’s Nalin Chutchotiham (9.5 percent); Bank of the Philippine Islands’ Emilio Neri Jr. (9.6 percent), Capital Economics’ Alex Holmes (9.7 percent) and Nomura’s Euben Paracuelles (9.8 percent).

Five economists projected another double-digit GDP fall during the July-to-September period, although at a slower pace than the previous quarter: ANZ’s Sanjay Mathur (10.2 percent), UnionBank of the Philippines’ Ruben Carlo Asuncion (10.6 percent), HSBC’s Noelan Arbis (11.1 percent), ING’s Nicholas Antonio Mapa (11.4 percent) and Standard Chartered’s Edward Lee (11.8 percent).

“While mobility activity data improved in the third quarter versus the second quarter on gradual easing of restrictions, still high daily infection numbers and reimposition of restrictive measures in several parts of the country may have limited the sequential pickup in growth,” Lee, whose forecast was the least optimistic in the Inquirer poll, said. INQ