MANILA, Philippines — BDO Unibank Inc. said the Philippine economy is set to recover with smaller gross domestic product (GDP) contractions in the third and fourth quarters, paving the way for a full recovery next year amid the pandemic. In a Market Sense webinar titled “Gearing up for recovery” organized by BDO Trust Group, BDO chief investment officer Frederico Ocampo  said the country may post a smaller GDP contraction of 9.6 percent in the third quarter and six percent in the fourth quarter.

The Philippines slipped into a recession as the GDP shrank by a record 16.5 percent in the second quarter.

The country’s GDP contracted by nine percent in the first semester as the economy stalled when the entire Luzon was placed under lockdown in mid-March.

Ocampo said the country’s GDP would likely contract by 8.3 percent this year.

Ocampo said the Philippines had 21 consecutive years of economic expansion, surpassed only by Australia. The country’s GDP last contracted in 1998 at 0.5 percent due to the Asian financial crisis.

“That is a testament to the resiliency and strength of the Philippine economy. While the growth drivers were hurt during the pandemic, the strengths of the Philippine economy remained intact.  For instance, our young population is still there,” Ocampo said.Ocampo also said the pandemic revealed the value of that young population in terms of adaptability to the digital economy and in terms of proficiency in the use of the internet.

“Later on, these young population, many of them would be creating their own companies and become entrepreneurs. Many jobs were lost during this pandemic. To cope, our young population would be creating their own companies,” Ocampo said.

For 2021, Ocampo said the country would rebound strongly with a GDP growth of 6.6 percent, fueled by more government spending.

“It would allow the economy to recover, and that would be the 2021 story. We’re facing a recession which could be the deepest in 35 years,” Ocampo said.

Ocampo said the economy’s growth drivers were hurt by the lockdown, especially the consumer demand,  investments from large local corporations, as well as the  small and medium enterprises (SMEs).

“But as the economy slowly opens up once again, you’ll see those drivers bouncing back,” Ocampo said.

For her part, economist and Marikina Rep. Stella Luz Quimbo said the government needs to spend even in the midst of a crisis in order to boost the confidence of the public, especially businesses.

“In a bad economic crisis, the confidence level is very low. The confidence of consumers, confidence of   workers. Everyone’s afraid. Fear and anxiety have set in. Even business owners, they don’t want to invest. In fact, they’d rather close shop. So this is a situation where government must step in. If the government is not spending enough, then our confidence will be deflated,” Quimbo told participants of the webinar.

Quimbo pointed out there is a need for the government to spend because there’s a lot of market failures arising from the pandemic.

Quimbo is one of the principal authors of the Accelerated Recovery and Investments Stimulus for the Economy of the Philippines (ARISE) bill which calls for the release of P1.3 trillion in economic stimulus package to jumpstart the economy.

Source: https://www.philstar.com/business/2020/10/12/2048817/bdo-optimistic-full-philippines-recovery-next-year