Economists see ‘very sharp’ GDP decline in Q2

The Philippines was expected to have fallen into a technical recession in the first half as economists projected a bigger drop in gross domestic product (GDP) during the second quarter—at the height of the longest and most stringent COVID-19 lockdown in the region.

While all 12 forecasts in the Inquirer’s poll last week agreed the second-quarter gross domestic product (GDP) again shrank after the surprise first-quarter contraction of 0.2 percent, the projections were across a wider range—as conservative as 4.3 percent and a high of 18 percent. Seven of them projected double-digit declines.

The government will report on the country’s second-quarter economic performance on Thursday (Aug. 6), while it reviewed the earlier projection of 2 to 3.4 percent GDP decline for 2020 as officials had admitted that the April-to-June period could be worse than initially expected.

Capital Economics’ Gareth Leather attributed his forecast of an 18-percent year-on-year contraction to the “massive economic impact” of strict containment measures under the enhanced community quarantine, which put a halt to three-fourths of the economy from mid-March to May.

For Banco de Oro (BDO) Unibank’s Jonathan L. Ravelas, his projection of negative 15.4 percent was “the steepest decline likely to be recorded” across the four quarters of 2020, as “the brunt of the COVID-19-related lockdown was felt by consumers and businesses” during the second quarter.

Oxford Economics’ Priyanka Kishore had projected decline of 14.3 percent, while Ateneo de Manila University’s Alvin P. Ang estimated 13.8 percent—a “hopeful” projection, although “it might be worse.”

Rizal Commercial Banking Corp.’s Michael L. Ricafort provided a range of minus 10 to 15 percent, which he attributed to “continued contraction/sluggishness in various economic data such as imports, exports, manufacturing, unemployment, overseas Filipino workers’ remittances, and foreign direct investments.”

UnionBank of the Philippines’ Ruben Carlo O. Asuncion projected GDP to shrink within the range of 9 to 13 percent in the second quarter—“we are indeed expecting a collapse.”

The forecast of Sun Life Financial’s Patrick M. Ella was a 10-percent contraction as “economic activity really grounded to a halt at some point.”

Barclays’ Angela Hsieh estimated second-quarter GDP shrinking by 9.4 percent, while Security Bank’s Robert Dan J. Roces projected 9 percent. —Ben O. de Vera INQ