Weak economy feared to spill over into Q3

MANILA  -Philippine gross domestic product (GDP) may contract again sequentially or quarter-on-quarter during the current July to September period, raising the prospect of “a modest technical recession” for the country, according to Pantheon Macroeconomics.

The United Kingdom-based group said in a commentary that the Philippine GDP report for the second quarter was “an utter disaster” considering that the readout of 4.3 percent was much slower than the 6 percent that forecasters expected.

Also in the second quarter, the domestic economy contracted 0.9 percent compared to the first quarter.

Pantheon Macroeconomics said the Philippine economy likely will continue to lose momentum following the second-quarter data.

Buckling consumption

“The main engine of the economy—private consumption—is buckling, suffering from three straight years of dissavings, the reversal of last year’s debt binge, and sub-par remittances growth,” the group said.

“Our base case is that the Philippines is undergoing a modest technical recession that should last until the third quarter, pulling full-year GDP growth down sharply to 4.5 percent from 7.6 percent in 2022,” it added.

This meant that Pantheon Macroeconomics expects another quarter-on-quarter contraction in unraveling during this quarter. But it also said the Philippines will emerge from the downtrend by the fourth quarter this year, when the group expects the Bangko Sentral ng Pilipinas to start reducing its policy rate from the current 6.25 percent.

Meanwhile, Finance Secretary Benjamin Diokno reiterated that the government’s full-year GDP growth target of 6 percent to 7 percent for 2023 remained attainable.

Diokno optimistic

Diokno said that goal would be achieved through, first, the aggressive monetary policy tightening that started in May 2022 and brought the benchmark interest rate from a historic low of 2 percent— a cumulative increase of 4.25 percentage points.

The Marcos administration’s economic team believes that the impact of policy tightening is already being felt and would remain so through to next year. Diokno said lower inflation would boost private spending.

Second, he said the administration is implementing and monitoring measures to mitigate rising prices of food items.

These include filling the domestic supply gap through timely and adequate importation based on supply-demand analysis and forecasts; strengthening the implementation of biosecurity and hog repopulation programs; and implementing measures to address the impact of El Niño.

Diokno has vowed to rev up state spending. INQ