The Philippine economy shrank by 11.5% in the third quarter, more than expected on a yearly basis due to the COVID-19 (Coronavirus) pandemic, official data showed on November 10, 2020. The rate of decline decreased towards the later months of the quarter as the world’s strictest lockdowns were lifted and its people and businesses allowed to operate. The lockdowns drove the economy into its first recession in 30 years.
According to Reuters, “Gross Domestic Product grew a seasonally adjusted 8% quarter-on-quarter in the July-September period as the government gradually lifted restrictions from the middle of May to help ease the economic pain. That was a big improvement on a previously reported 15.2% contraction in the second quarter.” The large decline was not expected by the market, but it is still an improvement from the 2nd quarter. “The economy is on the mend. The worst is over,” said Acting Economic Planning Secretary Karl Chua. It is clear that there will not be a “V-Shaped” recovery but rather a slower recovery as citizens begin leaving their homes and manufacturing and tourism returns.
Given the data released for the first three quarters of the year the Philippine economy is headed towards a full-year contraction in 2020. The virus is not yet 100% under control, foreign remittances are still down, and tourism is not likely to return immediately. Since the pandemic began the Philippine central bank cut its benchmark interest rates by a total of 175 basis points to 2.25%. In addition to the interest rate cut, the government has distributed 165.5 billion pesos (equivalent to $3.4 billion) worth of emergency relief measures targeted to the lower classes of society and businesses. Unemployment in the country is still at 10%; therefore, it is expected that the government will continue to distribute monetary aid to the poor in the coming months.
The World Bank projects that the Philippine economy will shrink by 6.9% in 2020 and will have the sharpest contraction compared to its neighbors. The Philippine government, on the other hand, is forecasting a contraction between 4.5% and 6.6% for the year. Both scenarios are not good news for the Philippines, but a strong recovery is still possible in 2021. In the same quarter, Vietnam grew by 2.6%. This is a result of its quick government response to the outbreak of the virus. Singapore and Indonesia also contracted during the same period but at a much slower rate.
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