UK think tanks see lower 2nd quarter growth driven by NCR COVID-19 surge

MANILA, Philippines—Two UK-based economic think tanks are seeing the Philippines’ second quarter 2021 output to shrink compared to first quarter gross domestic product (GDP) following more stringent quarantine measures in National Capital Region (NCR) Plus, which accounts for half of the economy.

In a May 26 report, Capital Economics said the Philippines’ second quarter GDP would likely contract by 3 percent quarter-on-quarter.

“This quarter, tight containment measures have been introduced across much of the country in response to a surge in infections,” said the report authored by Gareth Leather, Capital Economics senior Asia economist, Alex Holmes, Asia economist and Sophie Oudea, research assistant.

The looming quarter-on-quarter decline in GDP would end three straight quarters of growth since the trough in the second quarter of 2020 when 75 percent of the economy froze at the height of the longest and most stringent COVID-19 lockdown in Asia.

The gradual easing of quarantine restrictions had allowed quarter-on-quarter growth of 8 percent in the third quarter of 2020, followed by 5.6-percent expansion during the fourth quarter.

In the first quarter of 2021, the economy eked out a mere 0.3-percent increase in output compared to the previous quarter’s GDP.

For the entire 2021, Capital Economics projected GDP to grow 6 percent— at the lower end of the government’s downscaled 6-7 percent growth target.

Growth in 2021 would nonetheless keep the Philippines’ GDP about 1-percent below the pre-pandemic-induced recession level in 2019, Capital Economics said.

In a separate report, Pantheon Macroeconomics senior Asia economist Miguel Chanco said the Philippines’ second-quarter GDP was estimated to shrink by 0.6 percent quarter-on-quarter as he blamed the “second wave” of coronavirus infections.

“A robust third-quarter bounce looks unlikely, too, given the multiple headwinds facing households,” Chanco said.

Chanco projected full-year GDP growth at 5.4 percent, beneath the government’s goal.

For Chanco, inflation would be a “bigger problem” for Filipino consumers in the second half of 2021, as he estimated the rate of increase in prices of basic commodities to shoot up to an average of 5 percent—above the manageable target band of 2-4 percent—by yearend.

TSB