Gov't says Q1 contraction deeper as economy 'crash lands' into recession

ABS-CBN News

Posted at Aug 05 2020 11:24 AM | Updated as of Aug 05 2020 09:11 PM

Traffic flows freely along EDSA southbound approaching Cubao, Quezon City on August 4, 2020 on the first day of the modified enhanced community quarantine (MECQ) in Metro Manila and adjacent provinces. Mark Demayo, ABS-CBN News

MANILA - The Philippine Statistics Authority on Wednesday revised downward the country's first quarter gross domestic product (GDP) figure, a day before the release of potentially worse second quarter numbers.

Economic contraction from January to March period was deeper at -0.7 percent from -0.2 percent, the PSA said.

"The first quarter 2020 Gross Domestic Product (GDP) growth rate was revised from the preliminary -0.2 percent to -0.7 percent," the statement said.

The second quarter GDP is expected to be worse, economic managers earlier said as it covers majority of the lockdown period.

Second quarter GDP will be announced Thursday, Aug. 6. 

Economic growth could contract by 6.3 percent in the second quarter, Mapa said, adding that some analysts predict a steep drop to as much as -20 percent.

"The BSP has been very very proactive, analysts are split on how steep the contraction would be... this crash landing into negative and into recession," ING Philippines senior economist Nicholas Mapa told ANC.

Inflation in July quickened to 2.7 percent on the back on rising transport costs, among others, government data showed.

Although the higher "but still benign" inflation gives the BSP elbow room for more monetary policy actions, the economy needs more support such as stimulus measures to boost recovery, Mapa said.

"I think, he’s [BSP Gov. Diokno] on hold for now. I think Diokno realized he can’t do all the heavy lifting, he needs some help from his friend on the fiscal side of the house to do some stimulus measures as well," Mapa said.

The BSP has already reduced key interest rates to a record low of 2.25 percent.

Several measures, including the P1.3 trillion ARISE bill, are still pending in Congress.

Without consumer confidence, the economy would not be able to go back to its 6 percent average growth, he said.

Metro Manila, Rizal, Cavite, Bulacan and Laguna were placed back under modified enhanced community quarantine as COVID-19 cases surge. The measure limits business operations and shuts public transport. 

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