Philippines suffers 20% slump in Q2, says think tank

MANILA, Philippines — Economic output likely contracted by as much as 20 percent in the second quarter, making the Philippines one of the worst-performing economies in Asia, said London-based think tank Capital Economics.

The firm said the country’s performance during the quarter will be similar to that of Thailand, which saw a severe decline in its tourism sector, and India which also “suffered long, damaging lockdowns.”

Gross domestic product (GDP) in these countries are seen to have contracted by 15 percent up to 20 percent in the second quarter.

“We estimate that the Philippine economy shrank by almost 20 percent year-on-year in Q2, after output fell 0.2 percent in Q1,”Capital Economics said.

“Strict containment measures, which began late March remain in place in parts of the country. Monthly data suggest they are having massive economic impact.”

This assumption is bolstered by a nearly 45 percent decline in manufacturing output in April and May. While export values have recovered in May, it was still down by over 35 percent.

While the worst is over for the economy with the decline seen to have bottomed out in May, recovery in the following quarters is seen to be slow and will be more sluggish compared with other economies in the region as suggested by high frequency data such movement of people.

While monetary policy has been loosened in the face of the worsening economic outlook, Capital Economics noted that fiscal policy response has been weak.

“There has been more evidence that the fiscal response in the Philippines has been inadequate in the face of a huge slump in activity,” Capital Economics said.

Congress will be rushing to pass several economic stimulus bills meant to support economic recovery amid the pandemic.

The government is set to announce second quarter growth performance as well as the revised first quarter economic output next week.