SECURITY BANK Corp. sees the economy shrinking by 9.9% this year due to slower business activity and with a vaccine against the coronavirus disease 2019 (COVID-19) still under development.

“Uptick and renewed lockdowns worldwide provide downside risks. We do expect some additional activity to pick up in the next quarter,” Security Bank Executive Vice President and Treasurer Raul Martin A. Pedro said during the bank’s economic forum on Thursday.

“Heading to the fourth quarter, it will be better but not significantly better. If we look at nominal levels of economic activity, we would be hovering around P4.1-4.3 trillion in terms of GDP (gross domestic product),” he added.

The bank’s new forecast is worse than its projection of a 7.7% contraction in September. The government expects the economy to shrink by 4.5%-6.6% this year.

The Philippine economy remained in recession as GDP declined by 11.5% in the third quarter, a reversal of the 6.3% expansion recorded in the same quarter last year but easing from the record 16.9% plunge in the previous three-month period. This brought the year-to-date average to a contraction of 10%.

Security Bank said it expects the government to spend more efficiently to further accelerate business activity amid the pandemic.

“Fiscal support and improved mobility is imperative to support growth recovery. But the BSP (Bangko Sentral ng Pilipinas) is left to do heavy lifting,” the bank said.

The BSP has fired off several stimulus measures to help boost the economy. Last week, the Monetary Board trimmed the rates on the BSP’s overnight reverse repurchase, lending, and deposit facilities by another 25 basis points (bps) to 2%, 2.5%, and 1.5%, respectively. This brought cumulative cuts for the year to 200 bps.

Meanwhile, the government has provided a fiscal boost by way of two economic stimulus laws to aid businesses and sectors hit by the pandemic: Republic Act (RA) No. 11469, or the Bayanihan to Heal as One Act and RA 11494 or the Bayanihan to Recover as One Act (Bayanihan II).

However, Security Bank said these have been insufficient in stoking economic activity as most businesses are only recouping the losses they sustained in the past month.

“Bayanihan II per se has no additional impact because it only applies to current loans. Therefore, it has not changed the equation for the banks,” Mr. Pedro said.

“In a growing economy, you would expect that it will be importing a lot for capital expenditure and the result of that should be a weaker currency,” he added.

He said household spending and manufacturing will likely only start rebounding in the first half of 2021.

“A good part of our economy has been affected by the pandemic. It clearly changed our approach trying to reduce exposures to highly affected industries. We became a little stricter on our standards but the mentality towards MSMEs (micro, small and medium enterprises) has not changed. Once the economy normalizes, it is an area we want to be heavily involved again,” Mr. Pedro said.

The bank expects Philippine GDP to return to growth by 2022, forecasting a 6% expansion for that year. — KKTJ