‘Philippines economic recovery among slowest in Asia’

MANILA, Philippines — A prolonged lockdown that has now been in place for four months will cause the Philippine economy to contract by eight percent this year and make it among the slowest to recover in Asia, a London-based think tank said.

In a report, Capital Economics placed the pace of economic recovery in the Philippines alongside that of Indonesia and most of Southeast Asia where the number of reported COVID-19 cases is still rising.

The latest forecast for the domestic economy falls well below the government’s expectation of a contraction of two percent to 3.4 percent this year.

“These countries are trying to reopen their economies, which has led to an initial increase in activity. But social distancing will continue for much longer and recoveries are likely to be gradual,” Capital Economics said.

“A long lockdown, which has now been in place for four months, and inadequate fiscal support, will delay the recovery in the Philippines.”

In contrast, recovery in China, Vietnam and Taiwan will be fastest in the region as daily life has largely returned to normal because of early success in containing the spread of the coronavirus.

With still diminished economic activity in the country, inflation can be expected to average 2.2 percent this year, at the lower end of the government’s forecast of two to four percent.

The economy is already widely expected to have entered a technical recession in the second quarter of the year after a 0.2 percent decline in output in the first quarter.

Economic managers have already conceded that second quarter performance will be worse but hopes a rebound will occur in the last two quarters of the year.

Acting Socioeconomic Planning Secretary Karl Chua said last week that the economy is already showing signs of recovery – via a slower decline in trade performance and manufacturing output in May – but remains in “a very difficult position.”

Alongside limitations in business activity, economic stimulus measures meant to jumpstart key industries, provide wage support to workers, and strengthen the country’s health system among others, also remain pending in Congress.

A further threat to recovery would be the reimposition of the enhanced community quarantine (ECQ) in the National Capital Region as the number of confirmed COVID-19 cases continue to rise and hospitals become overburdened.

Metro Manila, the country’s economic powerhouse, remains under general community quarantine, the less severe version of the enhanced quarantine.

As seen in the effect of the severe two-month lockdown in the second quarter, particularly on trade and manufacturing data as well as on employment, Chua said the reimposition of ECQ will necessitate a new review of macroeconomic assumptions for the year.