BANGKO Sentral ng Pilipinas (BSP) Monetary Board believes the Philippine economy is bound to have another quarter of gross domestic product (GDP) contraction early this year before bouncing back to growth territory.
In its recently published highlights of the monetary policy stance board meeting, the BSP said they project the economy to “contract until 2021” still due to the measures imposed to restrict movement as a means for curbing Covid-19 cases.
“Domestic economic activity is projected to contract at a slower pace in the first quarter of 2021 before recovering in the second quarter of 2021 onwards.
The decline in GDP is seen to be driven primarily by further deterioration in the services sectors, which remained heavily affected by the pandemic despite the easing in quarantine measures,” the BSP said.
The Philippine economy contracted by 9.5 percent in 2020, the worst in more than half a century.
In particular, the BSP said the services sector is likely to continue to contract due to the slowdown in transport, tourism, and other service activities.
The agriculture sector, meanwhile, is projected by the BSP to expand slightly due to improved weather conditions during the quarter.
The BSP also said the industry sector could begin to gradually expand as manufacturing activity picks up based on evidence from high-frequency indicators.
In February, the Philippines’s Purchasing Managers Index (PMI) remained at 52.5, keeping its pace unchanged from the previous month.
A country’s PMI is meant to gauge the health of its manufacturing sector.
It is calculated as a weighted average of five individual subcomponents. Readings below 50 show deterioration in the industry while readings above the 50 threshold signal a growth in the manufacturing sector.
This is the first time that the Philippines’s PMI hit two consecutive months of being in growth territory since the beginning of pandemic-induced lockdowns and restrictions.
The BSP also said consumer and business sentiment have been aided by expectations of vaccine rollout.
“Greater fiscal support could also help minimize possible economic scarring and sustain the country’s nascent recovery,” the BSP said.
In its February 11 meeting, the BSP decided to keep all monetary policy levers unchanged. The BSP will have its next monetary policy meeting on March 25.