Economic contraction seen to be in single digits in 3rd quarter

THE COUNTRY’S economic contraction is seen to be in the single digits in the third quarter, as more sectors reopened with the easing of lockdown restrictions around the country, First Metro Investment Corp. (FMIC) and University of Asia and the Pacific (UA&P) said.

“Q3-2020 GDP (gross domestic product) will decline but in single-digits. We expect the industrial sector to lead the nascent recovery in the following months as the government continues to relax quarantine restrictions,” FMIC and UA&P said in the October issue of their joint “The Market Call” report published Monday.

FMIC and UA&P projected the third-quarter GDP shrinking by 5% at most, after the economy slumped by a record 16.5% in the second quarter.

The construction sector, buoyed by state spending on infrastructure and strong real estate demand, may have picked up ahead of other industrial sub-sectors, FMIC and UA&P said.

“A sprinkling of positive news and less negative economic data suggests that the economy is well past the bottom and is slowly gathering momentum,” they said.

The manufacturing sector is also seen to have improved from the previous quarter but at a slower pace, while mining is also expected to post a huge gain.

The country’s Manufacturing Purchasing Managers’ Index (PMI) improved to 50.2 in September from 47.3 in August, posting an expansion for the first time since February.

Government spending on infrastructure projects was still down 25% to P44.3 billion in August, bringing the year-to-date total to P394.5 billion, 11.5% lower from a year ago as ongoing restrictions continued to hamper construction works, data from the Budget department showed.

Lockdown restrictions have slowly loosened starting June to boost the economy.

FMIC and UA&P said there was a hint of “normalcy” in economic activity recently and a “significant improvement” in the last three months of the year.

“We do expect this to gain traction as the government has indicated willingness to ease COVID-19 induced restrictions in Q4, which should result in significantly greater construction and manufacturing activity as we approach the end of this dreadful 2020,” they said.

The government is planning to further ease business, travel and curfew restrictions to help the economy recover at a faster pace. However, COVID-19 infections continue to rise, with the addition of 2,638 cases on Monday to bring the total to 359,169.

“I expect a better economic performance for the 3rd quarter. Although not immediately positive growth, it is just a single digit contraction, possibly at -5%. This is due to a slow return to economic activity of the different sectors of the economy,” Colegio de San Juan de Letran Graduate School Dean Emmanuel J. Lopez said in a Viber message.

The Philippine Statistics Authority will report the third quarter GDP next month, Nov. 10. — B.M.Laforga