The Manila Times

GDP likely contracted by 3.3% in Q1

BY ANNA LEAH E. GONZALES

THE Philippine economy likely contracted for THE fiFTH CONSECUTIVE QUARTER AS QUARANTINE RESTRICTIONS CONTINUED TO AFFECT ECONOMIC ACTIVITy, ANALySTS POLLED By THE MANILA TIMES SAID.

Forecasts for the period ranged from -2.9 to -3.8 percent with a -3.3 percent average, slower than the -8.3 percent in the fourth quarter but worse than the -0.7 percent recorded in the first quarter a year ago.

Official first quarter gross domestic product (GDP) growth data will be

released by the Philippine Statistics Authority (PSA) on Tuesday, May 11.

Alvin Ang from the Ateneo Center for Research and Development projected the economy to contract by 3.8 percent this year.

He, however, did not provide an explanation.

Economists from the Union Bank of the Philippines (UnionBank) and Security Bank Corp. (SBC) estimated a 3.5-percent contraction.

“We initially estimated a 0.5-percent (positive growth) for Q1 (first quarter) GDP before the recent implementation of new restrictions. Furthermore, we thought there has not been a significant improvement in consumption, particularly household demand,” said UnionBank chief economist Carlo Asuncion.

“Non-discretionary consumption has been steady, with improvements in discretionary spending but not enough to pull the economy out of the red. Business and corporate demand has begun to gather steam at the start of 2021, as seen from the USD (US dollar) demand in the FX (foreign exchange) market, but only to dampen further as NCR Plus returned to a lockdown in March,” he added.

NCR Plus covers the National Capital Region and the provinces of Bulacan, Rizal, Laguna and Cavite.

Asuncion said they forecast first quarter GDP to settle within -3 to -4 percent.

Robert Dan Roces, chief economist of SBC, meanwhile, initially forecasted a 5.1-percent decline but revised it upward to -3.5 percent due to better trade figures.

“The good trade numbers show that momentum has picked up notably for exports in 1Q (first quarter), which was unprecedented and not factored initially in our econometric models. Improved unemployment numbers reported also helped lift the reading,” said Roces.

The PSA earlier reported that exports went up by 31.6 percent to $6.68 billion in March while the number of unemployed went down to 3.44 million from 4.2 million in February.

“Nonetheless, 1Q GDP still contracted to -3.5 percent as economic activity suffered from scarring effects the previous year. Improving numbers in March may be hampered though as growth may have softened with the reimposition of ECQ/MECQ (enhanced community quarantine/modified ECQ) coming into the second quarter,” said Roces.

Inflation factors, preelection spending

Regina Capital Development Corp.

Managing Director Luis Limlingan, for his part, said the economy likely contracted by 3.3 percent on the back of heightened inflation of food prices, elevated worldwide cost of crude oil, restricted movement of people and continuation of quarantine measures in many areas in the Philippines.

An economist from Rizal Commercial Banking Corp. (RCBC), meanwhile, offered a projection of -3 percent.

“Mathematically, higher base effects from January-February 2020 before the Covid-19 (coronavirus disease 2019) pandemic and the tighter quarantine standards in NCR Plus, especially since the final week of March 2021, could still lead to modest GDP year-onyear contraction in 1Q 2021,” said RCBC chief economist Michael Ricafort.

He, however, said GDP data could also pick up due to increased government spending especially on infrastructure in the second half of 2021 and up to February 2022 before the election ban in preparation for the presidential elections next year.

“Other major drivers of GDP data in the coming quarters include the Create Law, which could become one of the biggest stimulus measures in the coming years, as well as the timely approval of the national budget and extended validity of unused government funds from the 2020 national budget and from the Bayanihan 2 Law that further help increase infrastructure spending, which is a key pillar of the economic recovery program from Covid-19,” Ricafort said.

Create is the Corporate Recovery and Tax Incentives for Enterprises

Act while Bayanihan 2 is the Bayanihan to Recover as One Act.

HSBC Global Research and an economist from Philstocks Financial gave the most optimistic projection of -2.9 percent.

“We expect Q1 real GDP to have fallen by 2.9 percent y-o-y (yearon-year) in Q1, with a view that the economy likely stayed flat on a sequential basis (zero percent, quarter-on-quarter). Covid-19 cases were trending downwards for much of Q1, which should have spurred economic activity at the start of the year. However, cases rose again in March, leading to a decline in nonresidential mobility,” said HSBC in a report.

“This likely curtailed private consumption and fixed investments — two of the country’s main economic drivers. The outlook for Q2 (second quarter) looks even bleaker as Covid-19 cases continued to rise and lockdown measures were reimposed,” it added.

HSBC said economic recovery this year will be heavily reliant on timely vaccine distribution and government stimulus.

Philstocks Financial Inc. senior research analyst Japhet Tantiangco, for his part, said in the first quarter, the local economy was still recuperating from the damages brought about by the stringent quarantine measures implemented last year.

“Add that in Q1 of 2021, areas in the country were still under either general community quarantine or modified general community quarantine,” he said.

“While GCQ and MGCQ were relatively more relaxed compared to ECQ and MECQ, they still hindered the economy from operating at full capacity. Then in the last three days of Q1 of 2021, the NCR Plus was again under ECQ. Somehow, this was still seen to have caused economic losses during the said quarter,” he added.

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2021-05-10T07:00:00.0000000Z

2021-05-10T07:00:00.0000000Z

https://manilatimes.pressreader.com/article/281775632034593

The Manila Times