THE Philippine economy may have contracted by as much as 20% in the second quarter, when the strict lockdown was in place. — BLOOMBERG

By Beatrice M. Laforga and Luz Wendy T. Noble, Reporters

BANGKO Sentral ng Pilipinas Governor Benjamin E. Diokno on Wednesday said the “worst is over” for the economy after it already hit the lowest point of the crisis.

Think tank Capital Economics projected Philippine gross domestic product (GDP) to have shrank by nearly 20% in the second quarter as the strict lockdown came into full swing. 

“We estimate that the Philippines economy shrank by almost 20% year-on-year in Q2, after output fell 0.2% in Q1,” Capital Economics said in a July 28 report titled “Emerging Asia Chart Book: A mixed second quarter.”

A 20% contraction, if realized, will be the steepest decline in quarterly GDP in history and plunge the Philippines into a recession.

The PSA will release second-quarter GDP data on Aug. 6.

“I foresee a ‘hockey stick’ like recovery, with the lowest point in the second quarter…The worst is over,” Mr. Diokno said in a speech at an online forum on Wednesday.

“But the third quarter will be better and the fourth quarter will be even stronger. We expect a strong rebound in 2021 and 2020,” he added.

The government sees GDP shrinking by 2-3.4% this year, but expects growth of 8-9% in 2021 and 6-7% by 2022.

Capital Economics attributed the grim second-quarter GDP performance to the government’s stringent containment measures. Metro Manila and other parts of the country were placed under a strict lockdown from mid-March to May, causing a “massive economic impact” as nearly all economic activity was halted.

While restrictions on mobility are slowly being eased, Capital Economics said economic activity remained “depressed and is recovering much slower than elsewhere.“ It noted, however, the economic contraction may have already bottomed out in May.

“There has been more evidence that the fiscal response in the Philippines has been inadequate in the face of a huge slump in activity,” it added.

The Philippines, along with Thailand and India, are projected to be the “worst-performing economies” in the emerging Asia region due to prolonged strict lockdown measures and large exposure to the tourism sector, Capital Economics said.

Raul V. Fabela, professor emeritus at the University of the Philippines, said a slow reopening of the economy might push the government to release more funds for jobless Filipinos.

“The deficit and credit rating worry is misplaced. The economy is in the ICU (intensive care unit) but the government is acting like it is in the outpatient clinic! The recovery fund in Bayanihan II should be larger,”’ Mr. Fabella said in an e-mail, referring to the P140-billion stimulus measure approved by the Senate on Tuesday.

University of Asia and the Pacific School of Economics Dean Cid L. Terosa said further opening up the economy should be complemented by “confidence-building health measures,” good governance and digitalization to assure the public that the government can control the escalating coronavirus pandemic.

“I believe the approach should shift to building the resilience of cities and local communities so that they can  become active regenerators of economic and business activities. Opening up the economy and keeping it afloat means preparing, shielding, and nurturing the geographical spaces that cradle businesses, entrepreneurs, investors, and workers,” Mr. Terosa said via e-mail.

President Rodrigo R. Duterte said in his State of the Nation Address on Monday that opening up the economy to a pre-pandemic level “is not an option” for now as they assess the tradeoffs between public health and the economic impact.

Amid the continued surge in coronavirus infections, Mr. Diokno said the country has built enough capacity to respond to the health crisis. Wider, stricter lockdowns will no longer be needed,  and only targeted ones may be imposed in the barangay-level, he added.

“We have to be hopeful that things are starting to open up and that more people are going to get employed,” he said.

The country’s jobless rate rose to a 17.7% in April from the 5.1% a year ago. This is the highest since 2005 and represents 7.25 million jobless Filipinos. To add to this, more than 102,000 overseas Filipino workers (OFWs) have been repatriated due to the pandemic.

Mr. Diokno expressed confidence the July unemployment numbers to be reported by the PSA on Sept. 4 will not be as bad as the April figures.

But Philippine Chamber of Commerce and Industry (PCCI) Benedicto V. Yujuico said more Filipinos are likely to be jobless as the crisis stretches on.

“For unemployment, I see that it will continue to get worse — that is the report I am getting in the field — unless business actually opens up with a certain degree of safety,” he said during the forum.

“The key is consumer confidence, the key is businesses to recover slowly, and for us to manage the COVID-19 (coronavirus disease 2019) crisis. And all of this together will actually bring back the employment,” he added.

The Department of Health (DoH) on Wednesday reported 1,874 new coronavirus infections and 16 additional COVID-19 deaths. In a bulletin, the DoH said total deaths have increased to 1,962 while confirmed cases have reached 85,486.

Wednesday marked the 15th successive day of 1,000 or more new cases, which has pushed many hospitals nearer their patient capacity. — with Reuters