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PH economy seen shrinking by 2.5%


ANZ Research adjusted downward its estimate for Philippine gross domestic product (GDP) this year as it highlighted an all-around deterioration of growth in the second quarter.
“We forecast 2020 GDP to decline by 2.5 percent year-on-year, reflecting the sizeable headwinds to growth,” it said in a report released on Monday.

This photo shows the Baseco compound in Manila contrasted with still operational cranes in one of the major ports in the city where the country’s imports and exports also pass through. Fitch Solutions sees an economic recession this year due to the coronavirus disease 2019. PHOTO BY J. GERARD SEGUIA

The Australia-based institution’s latest projection is a downward revision from its previous GDP estimate of 1.2 percent. If correct, the forecast would fall within the government’s revised assumption of 2.0 to 3.4 percent contraction for 2020 and the 6-percent GDP growth in 2019.

It compares to the International Monetary Fund’s 0.6 percent, S&P Global Ratings’ -0.2 percent, Fitch Ratings’ -1 percent, the World Bank’s -1.9 percent, Fitch Solutions’ -2 percent, Moody’s Investors Service’s -2 percent, Sun Life Philippines’ -2 to 2.5 percent, the Asian Development Bank’s -3.8 percent, Rizal Commercial Banking Corp.’s -2 to -4 percent, ING Bank Manila’s -2.9 percent, Nomura’s -4.8 to -2.4 percent, and Capital Economics’ -6 percent.

ANZ Research emphasized that “a recession seems inevitable” for the Philippine economy as growth is certain to have deteriorated further in the second quarter from the 0.2 percent fall in the previous quarter, with the Luzon — accounts for 74 percent of GDP — under lockdown for most of the quarter.

“The current high unemployment rate, if sustained, could have dire consequences for household spending even as it reels from lower remittances,” it also said.

Earlier, the government reported that an estimated 7.3 million Filipinos were jobless in April, which translates to a record 17.7-percent unemployment rate.

ANZ Research stressed that household consumption has likely collapsed with contractions in both discretionary and nondiscretionary consumption.

The latest available data for passenger vehicle sales posted a 72-percent decline in March, it added.

“Remittances from abroad, which have in the past acted to cushion from the effect of domestic shocks, are also vulnerable,” ANZ Research also said.

Latest data show that personal remittances from overseas Filipino workers hit $8.21 billion in the first quarter of the year, a 1.5-percent surge from $8.09 billion in January to March 2019.

“Fiscal and monetary policies have and will continue to turn more expansionary but even so, the shock to growth is simply overwhelming,” ANZ Research further said.

The government has so far earmarked P1.74 trillion or 9.1 percent of GDP for the strategy, which includes: emergency support for vulnerable groups and individuals; marshalling of resources to fight the virus; fiscal and monetary actions to finance emergency initiatives and keep the economy afloat; and an economic recovery program focused on getting businesses back on their feet to sustain and create jobs.

Monetary policy responses, meanwhile, include reduction in the Bangko Sentral ng Pilipinas’ overnight policy interest rate by a total of 125 basis points (bps); lowering by 200bps of banks’ reserve requirements alongside additional modes of compliance to encourage bank lending to micro, small and medium enterprises affected by the pandemic; and purchases of government securities from domestic banks in the secondary market.


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