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Economy to improve in Q4 – FMIC, UA&P

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The Philippine economy is expected to perform better in the fourth quarter of 2020 after the country’s industrial production and exports showed improvements in the third, First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said on Wednesday.

In their latest Market Call report, FMIC and UA&P said “a seemingly minor 2.2-percent year-on-year growth in exports for September and [a] single-digit contraction in industrial output suggest that the economy, which [is still reeling] from Covid-19 (coronavirus disease 2019) in Q3 2020 (third quarter of 2020), now heads for more recovery.”

The report noted that the country’s volume of production index declined at a slower pace of 6.5 percent in September from 9 percent in August, prompting FMIC and UA&P to project that the industrial sector continued to bounce back, “albeit not as fast as earlier expected.”
Industrial production would continue to improve as the government further eases quarantine restrictions, they said.

National government (NG) spending dropped by 15.5 percent to P350.9 billion in the ninth month, which FMIC and UA&P said “primarily arose due to the high base a year ago (+39 percent).”

“The NG spending decline in September appears as an outlier for Q3 due to the large base effect, as top government officials have pressed agencies to accelerate spending to avoid a disappointment in Q4 (fourth quarter),” the report said.

Exports grew for the first time in eight months, increasing by 2.2 percent to $6.2 billion in September, which FMIC and UA&P “supports optimism for the sector as” the economic recovery in China and Southeast Asia had “fueled the rise and a stronger pickup of the US economy has appeared on the horizon.”

The Bangko Sentral ng Pilipinas’ move to cut its interest rates by another 25 basis points would also prod banks to lend more to support economic recovery efforts, according to the report.

The Philippines remained in recession after domestic output slid by 11.5 in the third quarter, 16.9 percent in the second and 0.7 percent in the first. This brought the contraction in gross domestic product (GDP) to 10 percent in the first nine months.

Earlier, FMIC and UA&P said they expect GDP to contract by 8 to 9 percent this year.