Philippine economy shrinks by more than expected in Q3, but government says ‘worst is over’

MANILA: The Philippine economy shrank by more than expected in the third quarter from a year ago as the COVID-19 pandemic continued to batter the Southeast Asian country but a loosening of coronavirus curbs helped ease the pain.
Gross domestic product (GDP) shrank 11.5 percent, the statistics agency said on Tuesday, after a 16.9 percent slump in the second quarter when the economy entered its first recession in nearly 30 years. Economists in a Reuters poll had forecast a 9.8 percent year-on-year contraction.
GDP grew a seasonally adjusted 8 percent quarter-on-quarter, after a 14.9 percent contraction in April-June.
The government has gradually lifted coronavirus curbs since May after imposing one of the strictest lockdowns globally this year. But analysts worry about the Philippines’ outlook as it struggles to contain the virus at home, while a resurgence of cases abroad threatens the global economic recovery.
“The economic team is optimistic that the worst is over for the country,” said Acting Economic Planning Secretary Karl Chua, projecting a “strong bounce-back” in 2021.
The data showed household spending and investment continued to suffer while government spending slowed. Household spending fell 9.3 percent in the third quarter from the year before and investment slumped 37.1 percent over the same period.
“Improvements are likely to be harder to come by in the quarters ahead,” said Alex Holmes, Asia economist at Capital Economics. “With the virus still not under control, a further scaling back of containment measures will take longer.”
HSBC economist Noelan Arbis expected the central bank to keep rates steady for the rest of 2020, but ING senior economist Nicholas Mapa said the data could prompt a knee-jerk move.
The central bank cut interest rates by a total of 175 basis points this year while the government has launched $3.4 billion (165.5 billion pesos) worth of stimulus measures.
“With fiscal authorities pulling back on spending at a time we need it the most, monetary authorities may be compelled to trim rates but at this point, it may be the less effective response,” ING’s Mapa said.
Government spending rose 5.8 percent in the third quarter from a year ago, compared with a 21.8 percent surge in the second quarter.
The Philippines has the second-highest number of coronavirus cases and COVID-19 deaths in Southeast Asia.

Philippine economy shrinks by more than expected in Q3, but government says ‘worst is over’