ECONOMIC recovery may hasten in the fourth quarter as movement restrictions are relaxed one after the other, but this will fall short of saving full-year GDP from contracting by as much as 8.5 percent, a think tank has projected.
In the September issue of The Market Call, the First Metro Investment Corp. and University of Asia and Pacific (FMIC-UA&P) Capital Markets Research said the Philippines is showing signs it can recover in the second half. However, the rebound in the closing months of 2020 will fail to prevent full-year GDP from declining by 6.5 percent to 8.5 percent.
“Although the deep dive in Q2, which impacts also Q3, suggests full-year GDP to decline by 6.5 percent to 8.5 percent, we expect a more positive outlook for Q4 with the Philippine economy slowly recovering and milder restrictions in place starting September,” the report read.
The FMIC-UA&P Capital Markets Research pointed to the 7.5 million workers who returned to work as an indicator the economy is bouncing back. Based on the Labor Force Survey in July, unemployment rate worsened to 10 percent, from 5.4 percent during the same period last year, but improved from the record-high 17.7 percent in April.
“We should see even better improvements in the real sector as more people get back to work [and] quarantine constraints have become more focused on local hot spots,” it said.
Further, the think tank argued inflation may even sink below its original forecast of 2.5 percent, as food supply is now expected to steady and production is seen to normalize. Likewise, crude prices in the international market remained below $40 per barrel, it added.
“Headline inflation will likely end full year at 2.4 percent, from our earlier 2.5-percent forecast,” The Market Call read.
The FMIC-UA&P Capital Markets Research also raised the increasing spending of the national government as another factor for recovery in the fourth quarter. Based on data from the Bureau of the Treasury, July spending swelled 10.4 percent to P374.7 billion, from P339.4 billion during the same month last year, on the second release of social amelioration funds.
“National government shall ramp up spending, especially on infrastructure and health facilities, to inject vitality into the weakened economy,” the report added.
As for factory output and exports, the FMIC-UA&P Capital Markets Research said figures may start to improve but not at a dramatic pace. Manufacturing PMI in August fell to 47.3, from 48.4 in July, after quarantine protocols in Metro Manila were tightened for two weeks.
On the other hand, the think tank noted exports decline in July improved to 9.6 percent, from 12.5 percent in June, marking the fifth straight month that shipments slipped as the world economy grapples with the Covid-19 pandemic.
As the Philippines enforces one of the longest lockdowns to contain the spread of Covid-19, it endured its worst economic performance on record in the second quarter. GDP in the second quarter plunged 16.5 percent, the worst reading since 1981.
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