The Philippines will still post a contraction in the third quarter, but it will likely be single-digit, as the economy continues to open up amid easing lockdown restrictions, according to a report released by First Metro Investment Corp. and University of Asia and the Pacific yesterday.
The latest issue of the Market Call said the industrial sector, which includes construction, manufacturing and mining, seems poised for more substantial gains as the government continues to relax quarantine measures.
The report also said inflation will remain muted with stable food and crude oil prices, while government spending, especially on infrastructure and health facilities and medicines, should accelerate for the rest of the year.
“All these make us believe that the third quarter gross domestic product (GDP) fall will prove much milder than the deep dive in the second quarter. The third quarter 2020 GDP will decline but in single-digits,” the report said.
“More ‘green shoots’ seem to have sprouted since our previous issue, even though we remain cautiously optimistic about the near-term. All told, a GDP decline of not more than five percent in the third quarter would indicate a wider coverage in the recovery stage,” it added.
The Philippine economy in the second quarter posted the sharpest slump for a quarter period on record, due to the economic impact of lockdown measures imposed amid the coronavirus pandemic.
The country’s GDP dropped by 16.5 percent in the second quarter of 2020, the lowest figure posted based on the available quarterly data which starts from 1981.
Meanwhile, the report said while headline inflation may not fall sharply in October and November due to a low base a year ago and elevated crude oil prices, the monthly seasonally adjusted movements do show a weakening pace such that it is expected to go below two percent by January 2021.
“The full-year average inflation should settle at 2.4 percent while it may still ease further in 2021,” the Market Call said.
“The peso will likely trade sideways until such time as a clearer and more solid economic recovery gain traction,” it added.