MANILA, Philippines—United Kingdom-based think tank Pantheon Macroeconomics expects the Philippines’ second-quarter output to shrink by a bigger 1.5 percent compared to first-quarter gross domestic product (GDP), no thanks to weaker private consumption due to prolonged and more stringent quarantine restrictions in areas accounting for half of the economy.
While the government was set to release official first quarter GDP figures on Tuesday (May 11), Pantheon Macroeconomics senior Asia economist Miguel Chanco on Monday (May 10) downgraded his quarter-on-quarter forecast for the second quarter of 2021 from his previous estimate of 1-percent contraction compared to end-March output.
“We continue to believe that the economy will shrink modestly this quarter, due to the anti-virus curbs still in effect,” Chanco said.
“The government decided that Manila and surrounding areas would remain under the modified enhanced community quarantine [MECQ]—the second most-rigid rules—until May 14, at least,” he said.
“That said, the second wave finally is turning the corner, and mobility indicators suggest that compliance or enforcement hasn’t been as strict as before, though it’s probably a mix of both,” Chanco said.
National Capital Region (NCR) Plus, which lumps together Metro Manila and the provinces of Bulacan, Cavite, Laguna and Rizal, also reverted to two weeks of enhanced community quarantine (ECQ), the strictest lockdown, from March 29 to April 11 in a bid to soften the impact of a tsunami of COVID-19 cases driven by more contagious variants of SARS Cov2, the coronavirus that causes COVID-19.
Last week, Chanco said in an email that his projection of 3.7-percent year-on-year drop in first-quarter GDP likely meant a softer 1.6-percent increase in output from January to March compared to the October to December 2020 period.
“Much of the loss in momentum will come from a much-bigger drag from trade, as imports outperformed exports significantly last quarter,” Chanco said.
Since the trough in the second quarter of 2020, when 75 percent of the economy froze in the wake of the most stringent lockdown in the region that shuttered thousands of businesses and killed millions of jobs, the gradual easing of restrictions had allowed a quarter-on-quarter growth of 8 percent in the third quarter of 2020, then a slower 5.6 percent growth in the fourth quarter of the same year.
The government had been closely monitoring quarter-on-quarter GDP growth as this reflected how moves to reopen the economy immediately impacted consumption and business activities compared to prior months or quarters of stricter measures.
Socioeconomic Planning Secretary Karl Kendrick Chua had lamented a “slow” reopening of the economy at the start of 2021, which prompted him to concede that first quarter GDP was again likely to shrink year-on-year, prolonging the pandemic-induced recession to five successive quarters.
But year-on-year, GDP would likely grow in the second quarter, as Chanco noted that “the hit of the second wave won’t be apparent due to the help of even more favorable base effects from last year’s lockdown.”
For the entire 2021, Chanco said “the lower end of the government’s target range is still within reach, but that’s not really saying much, given the favorable base from last year’s unprecedented contraction.”
The government’s GDP growth goal for 2021 was 6.5-7.5 percent, following last year’s worst post-war recession when the economy shrank by a record 9.6 percent.
To fast-track economic recovery, Chanco said “the government’s focus really should remain on COVID-19 and, more specifically, expediting the procurement and distribution of the vaccine.”
TSB