PH may be out of recession in Q2 but recovery prospects still dim

While the Philippines may have technically exited from recession in the second quarter, thanks to last year’s low base, the April to June output is expected to have shrunk from previous quarter’s level given the two-week lockdown in April due to a surge in COVID-19 cases, economists said last week.

All 19 economists and financial institutions polled by the Inquirer were expecting the second-quarter gross domestic product (GDP) to have returned to positive territory on a year-on-year basis. Report on second-quarter GDP will be released on Tuesday.

The majority—14 of them—projected growth at 10 percent and above, owing to the trough in the second quarter last year when GDP shrank by a record 16.9 percent year-on-year amid the then most stringent COVID-19 lockdown in the region. The enhanced community quarantine (ECQ) from mid-March to May 2020 stopped 75 percent of the economy.

High of 15.2%

Ateneo de Manila University’s Ser Percival Peña-Reyes had the highest GDP growth forecast of 15.2 percent.

“The economy has been much more open in the second quarter this year versus last year … Commercial and business establishments have been busier this year. Employment figures have also been much better. These are all reflected in higher electricity consumption,” Peña-Reyes explained.

Goldman Sachs Economics Research projected a 13-percent growth; Oxford Economics’ Makoto Tsuchiya, 12.9 percent; Deutsche Bank Research’s Juliana Lee, 12.5 percent; BDO Unibank’s Jonathan Ravelas, 12 percent; ANZ’s Sanjay Mathur, 11.7 percent; Capital Economics’ Alex Holmes, 11.5 percent; ING’s Nicholas Mapa, 10.9 percent; Pantheon Macroeconomics’ Miguel Chanco, 10.7 percent; HSBC Global Research, 10.5 percent, and Bank of the Philippine Islands’ Jun Neri, 10.6 percent.

A similar forecast of a 10-percent growth was shared by Moody’s Analytics’ Steve Cochrane, Rizal Commercial Banking Corp.’s Michael Ricafort and Sun Life Financial’s Patrick Ella.

Even at more than 10-percent jump, Holmes said it would remain about “9.5 percent below its pre-crisis level and 17.5 percent behind its pre-crisis trend.”

Lowest at 3 to 4%

Natixis’ Junyu Tan sees second-quarter GDP growth at 9.4 percent year-on-year; UnionBank’s Carlo Asuncion, 8.5 percent, and Philippine National Bank’s Alvin Arogo and Security Bank’s Dan Roces, both 7.7 percent.

University of Asia and the Pacific’s Victor Abola had the lowest forecast of 3 to 4 percent. This, he said, was due to a very weak consumer spending because of lower incomes and faster-than-expected inflation when food prices peaked.

Abola said consumers were “scrimping on their spending— increasing savings, if possible, for the uncertainties that lie ahead.”

But 10 economists—Asuncion, Chanco, Holmes, HSBC, Mapa, Mathur, Neri, Ricafort, Roces, and Tan—expect the second quarter to have ended the seasonally adjusted quarter-on-quarter growth seen since the third quarter of 2020. They projected the second quarter GDP to have shrunk by 0.8 percent to 3.5 percent compared to the first-quarter output.

As Metro Manila was placed on ECQ again from Aug. 6 to Aug. 20, economists turned less optimistic about the outlook for the second half of the year.

“There are increasing concerns over the third-quarter growth prospects amid recurring COVID-19 outbreaks that prompted the government to reimpose a two-week strict lockdown in [Metro Manila],” Lee said.

“We expect the road to recovery for the rest of the year to be bumpy. Renewed restrictions around Metro Manila given the more transmissible Delta variant mean that the recovery prospect is once again dimmed.