Economists hopeful ‘real’ rebound to start in H2

With the pandemic-induced recession widely expected to have extended to five straight quarters during the first quarter of 2021, many private-sector economists are worried that the slow crawl to recovery may spill over to the second quarter amid prolonged, more stringent quarantine restrictions in areas accounting for half of the economy.

Out of the 17 economists polled by the Inquirer last week, 16 had projected a year-on-year gross domestic product (GDP) contraction of between 1.2 percent and 4.5 percent in the first quarter. The government’s first-quarter GDP report will be out on Tuesday, May 11.

The lone economist who projected GDP growth for the first three months was Philippine National Bank’s Alvin Joseph Arogo, attributing his more bullish estimates to “the purchasing managers’ index (PMI) that signaled an expansion at an average reading of 52.4, and government spending growth of 20 percent year-on-year.”

Those who projected year-on-year decline in output include Deutsche Bank Research (1.2 percent); Bank of the Philippine Islands’ Emilio Neri Jr. (1.3 percent); Institute of International Finance’s Yuanliu Hu (2.1 percent); Oxford Economics’ Makoto Tsuchiya (2.2 percent); Capital Economics’ Alex Holmes (2.3 percent); Moody’s Analytics’ Steven Cochrane (2.6 percent); Nomura’s Euben Paracuelles (2.8 percent); and HSBC Global Research (2.9 percent).

Maybank’s Zamros Bin Dzulkafli, Natixis’ Junyu Tan, and Rizal Commercial Banking Corp.’s Michael Ricafort projected a 3-percent year-on-year GDP contraction in the first quarter; ING’s Nicholas Antonio Mapa and Security Bank’s Robert Dan Roces, 3.5 percent; UnionBank’s Ruben Carlo Asuncion, 3.6 percent; Pantheon Macroeconomics’ Miguel Chanco, 3.7 percent, and BDO Unibank’s Jonathan Ravelas, 4.5 percent.

Having the most pessimistic forecast, Ravelas said “the delayed reopening of the economy in the first quarter put a toll on growth.”

Still weak Q2 GDP

“Second-quarter GDP could still be weak due to mobility restrictions,” Ravelas warned, referring to the two-week reimposition of enhanced community quarantine (ECQ) followed by the ongoing modified enhanced community quarantine in National Capital Region (NCR) Plus—Metro Manila and the provinces of Bulacan, Cavite, Laguna and Rizal.

Since the ECQ was reimposed in NCR Plus just a couple of days before the first quarter ended, most of the economists who projected year-on-year contraction estimated that the first-quarter GDP likely managed to post between 0.5 percent and 1.8 percent improvement compared to the level in the fourth quarter of 2020.

“The pandemic was manageable in January and February with improved mobility, so some marginal increase should be expected” quarter-on-quarter, Tan said.

But a longer MECQ in NCR Plus “could lead to a double-dip in economic output by the second quarter,” Paracuelles said.

Easing of restrictions

Given the low base—a record 16.9 percent GDP contraction in April to June last year—it is mathematically possible to post growth in the second quarter even as output may be smaller than the first quarter’s.

Some economists are hopeful that a real economic rebound would begin by the second half of the year.

“While we expect recovery to gain a firmer footing in the second half as restrictions are further relaxed and the vaccine rollout accelerates, health-related risks will persist for longer as daily new COVID-19 cases remain high. This will likely continue to weigh on consumer and business sentiment,” Tsuchiya said.

As such, the more optimistic economists said the low end of the government’s 6.5 to 7.5 percent GDP growth target for 2021 might still be attainable. INQ