WITH 6.5-8.5% CONTRACTION FOR 2020: Outlook for Q4 turns positive

    Just the basics. A stall in Manila sells washable face masks. The trade department expects Christmas spending to be subdued. (Photo by Rhoy Cobilla)

    As the economy continues to open up after months of being in strict lockdown, a more positive outlook is seen for the fourth quarter.

    However, the economy is projected to post a contraction of 6.5 to 8.5 percent for the year.

    These are some of the highlights of the Market Call rreleased by First Metro Investment Corp. and the University of Asia and the Pacific capital markets research .
    According to the report, the outlook has brightened a bit for the fourth quarter of the year.

    “Although the deep dive in the second quarter which impacts also the third quarter suggests full-year gross domestic product to decline by 6.5 percent to 8.5 percent, we expect a more positive outlook for the fourth quarter with the Philippine economy slowly recovering and milder restrictions in place starting September,” the report said.

    The slew of recently released economic data, including job recovery, slower inflation, sustained growth in overseas Filipino workers’ (OFW) remittances and milder quarantine restrictions starting September 1 have raised hopes of faster economic recovery by the last three months of the year, the study noted.

    “We should see even better improvements in the real sector as more people get back to work amidst quarantine constraints have become more focused on local hot spots,” it said.

    According to the report, inflation has likely peaked at 2.7 percent in July given that food supplies and overall production head towards normalization, while crude oil prices have fallen and remained below $40/barrel.

    “Inflation will be below 2.5 percent as crude oil prices remain low. We also see more job recoveries and growth in OFW remittances. National government spending will continue to increase especially on infrastructure and health facilities,” it said.

    “The peso may have peaked in early September given that the US dollar appears to have bottomed in August and the domestic economy’s recovery gain traction,” it added.