MANILA (UPDATE 3) - The Philippine economy shrank 11.5 percent in the third quarter, marking the first time in 35 years that the country’s gross domestic product (GDP) contracted for three straight quarters, the state statistics bureau said on Tuesday.
The third quarter slump was steeper than the 9.8 percent decline seen by economists in a Reuters poll.
The negative growth in the July to September period followed a revised 16.9 percent contraction of the GDP in the second quarter from a year earlier, according to the Philippine Statistics Authority (PSA).
First quarter GDP had earlier also been revised to -0.7 percent from -0.2 percent.
This means that the GDP has contracted 9.7 percent in the first three quarters of the year, as the Philippines struggled to control the spread of COVID-19.
The Philippines has the second-highest number of coronavirus cases and COVID-19 deaths in the Southeast Asian region.
The World Bank earlier said it expects the Philippines, which has been among the world's fastest-growing economies in recent years, to shrink 6.9 percent in 2020.
In an October report, the International Monetary Fund meanwhile forecast Philippine GDP contracting 8.3 percent this year, which is the worst in Southeast Asia.
A Reuters poll of economists sees the economy shrinking 8.9 percent for the whole of 2020, which is much steeper than the 4.5 percent to 6.6 percent decline forecast by Philippine economic managers.
Economists have blamed the world’s longest and strictest lockdown for the record decline of the Philippine economy in the second quarter.
Acting Economic Planning Secretary Karl Chua also blamed the reimposition of lockdowns in the third quarter for the economic slump during the period.
“The double-digit contraction in the third quarter is not surprising given the return of more stringent quarantine measures in NCR and neighboring provinces, and Cebu City, which together account for around 60 percent of the Philippine economy,” Chua said.
Agriculture was the lone bright spot in the PSA report, as it grew 1.2 percent in the third quarter. Industry meanwhile shrank 17.2 percent, while services contracted 10.6 percent.
On a quarter per quarter basis, GDP grew a seasonally adjusted 8 percent in the third quarter from the previous 3 months as the government gradually lifted restrictions from the middle of May to help ease the economic pain.
"The economy is on the mend. The worst is over," said Chua, reading a prepared joint statement by the government's economic managers at a virtual press conference.
Chua said the government expects the economy to continue to improve in the fourth quarter as quarantine restrictions are further eased.
“Managing risks instead of avoiding them will allow us to safely open more of the economy and help Filipinos recover their sources of income. This will also put the Philippines back on its solid growth trajectory.”
The pick-up in economic activity, along with moderate inflation, eases the pressure on the Bangko Sentral ng Pilipinas to provide further monetary support.
The central bank already cut benchmark interest rates by a total of 175 basis points this year while the government has launched P165.5 billion worth of emergency relief measures to boost healthcare services and help businesses.
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.
"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," said Mapa.
- With a report from Reuters