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Philippines: Recession seen to extend to Q2
MANILA, Philippines — The Philippines may suffer its sixth consecutive economic decline in the second quarter as the prolonged lockdown coupled with rising prices force families to reduce their consumption, an international think tank said.
UK-based Pantheon Macroeconomics said gross domestic product (GDP) may further slip by 0.6 percent in the second quarter, with families now running out of savings to spend for their basic needs.
“We continue to believe that the economy will suffer an outright – albeit mild – contraction in the current quarter in the face of the second virus outbreak and the consequent reintroduction of the stricter curbs,” Pantheon said in an economic monitor.
It said consumption, which accounts for roughly 70 percent of GDP, may weaken in the April to June period.
The return to lockdown in Metro Manila and its surrounding provinces drove workers out of their jobs, leaving them no choice but to use up whatever remains of their savings to get through the lockdown, the think tank said.
“For a start, Filipino households are facing the most pressure on purchasing power in the region from rising inflation. Remember, too, that consumers aren’t sitting on a pile of savings to splurge once the COVID clouds clear, after drawing down significantly last year at the height of the economic squeeze,” Pantheon said.
The think tank said families are pressured as well by the surging cost of basic needs, as inflation remained high at 4.5 percent in April – beyond the government’s target range of two to four percent.
Pantheon expects inflation to accelerate by more than six percent in the third quarter as oil prices are seen to peak due to demand pickup from the travel sector.
Another UK-based research house, Capital Economics, anticipates Brent crude to breach $70 per barrel within the second quarter and soar to as high as $75 by the succeeding quarter.
Local research group IBON Foundation warned the government the economy may worsen if it keeps on denying the poor another round of cash subsidies. Without such, it said demand would fall off in the coming months, and this may compel small firms to close for good.
“Fiscal stimulus, particularly to increase the purchasing power of distressed and hungry families, is critical to boost aggregate demand. But the government merely bloats its COVID-19 response with ineffective monetary and liquidity measures,” IBON Foundation said in a statement.
The Philippines has now sunk into its longest recession since the Marcos era, when the economy collapsed under the weight of mounting foreign debt in the 1980s.
GDP shrank by 4.2 percent in the first quarter, the fifth consecutive quarter of economic contraction for a country expecting to expand between 6.5 percent and 7.5 percent this year.
Source: https://www.philstar.com/business/2021/05/13/2097777/recession-seen-extend-q2