Philippine economic growth is expected to remain negative in the fourth quarter as lockdowns aimed at containing the coronavirus pandemic remain enforced, according to Capital Economics.
In a report on Thursday night, the London-based research consultancy firm projected an 8.5-percent contraction in the country’s gross domestic product in October to December.
The figure is an improvement from the -11.5 percent in the third quarter, but a reversal of the 6.7-percent growth in the last three months of 2019.
“With the virus still not under control, restrictions will need to remain in place for longer, which will further hold back the recovery,” Capital Economics Asia economist Alex Holmes said..
The Philippines still lags behind most other countries in the region despite the recent pickup in mobility, he noted, and “promising news on vaccines looks unlikely to change the situation in the near term.”
He said that while the country was reportedly close to securing 25 million doses of China’s Sinovac vaccine, these would only be enough to inoculate just over 10 percent of the population.
“The economic scars from the downturn, including business insolvencies, weaker household balance sheets and high unemployment, will weigh heavily on demand for many months to come,” he warned.
Latest state data showed that unemployment fell to 8.7 percent in October from 10 percent in July. The underemployment rate — the proportion of employed persons wanting additional work — reached 14.4 percent in the 10th month, better than July’s 17.3 percent but worse than October 2019’s 12.8 percent.
A lack of fiscal support will continue to restrain recovery, Holmes said, calling government spending this year “lackluster” and “plagued by administrative problems in directing the money to where it is needed.”
But latest government data showed state spending in the 10 months ending October reached to P3.31 trillion, 12.7 percent or P374.5 billion bigger than the year-ago amount.
“Overall, we are expecting the economy to contract by 9.5 percent this year and grow by 11 percent in 2021, which would still leave output around 10 percent lower than its pre-crisis trend by the end of next year,” Holmes said.
The forecast — worse than the 8-percent contraction it projected earlier — lands at the upper end of the government’s revised assumption of a 8.5- to 9.5-percent contraction, and matches those of DBS and S&P Global Ratings.
It is worse than the Atram Group’s 9.2 percent, Fitch Solutions and ANZ Research’s -9.1 percent, Sun Life Philippines’ -8.8 percent, the International Monetary Fund’s -8.3 percent, the Asian Development Bank’s -8.5 percent, the World Bank’s -8.1 percent, and Moody’s Investors Service’s -7 percent.
But it is better than the Bank of the Philippine Islands’ -11 percent, ING Bank Manila’s -10.8 percent, Rizal Commercial Banking Corp.’s -9.5 percent to -10 percent, Security Bank Corp.’s -9.9 percent; Nomura’s -9.8 percent, Fitch Ratings’ -9.6 percent.
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 GDP to 10 percent in the first nine months.