Disclaimer

by clicking a geography button, you agree to abide by terms and conditions listed herein.

Home Markets Philippines e...

Philippines exits recession but Covid clouds outlook

The Philippine economy showed its fastest year-on-year growth since 1988, led by rising domestic demand and a rebound in construction activity. But the ongoing lockdowns aimed at fighting the spread of the delta variant are clouding the future outlook, as per analysts.

Gross domestic product (GDP) rose to 11.8% in Q2, with the economy exiting recession after five consecutive quarters of contractions. In the same period of last year, the Philippine economy contracted 17%.

Philippines out of recession?

In a research note, ING Bank Manila senior economist Nicholas Mapa said that the resumption of lockdowns in April and in August has derailed the economic recovery. “We can expect this trend to continue in the second half of the year,” he wrote.

Calling it the “base effect,” Sian Fenner, Lead Asia Economist from Oxford Economics, said the Q2 GDP was boosted by the low base in Q2.

The overall GDP in the first half of 2021 was 3.7% higher than the first half of 2020. GDP had fallen to a record -9.6% last year.

According to Philippine Statistics Authority (PSA) chief Dennis Mapa, the economy needs to grow 8.2% in the second half of the year to hit the low end of the government’s full-year growth target of 6-7%.

Asian Market Insights

Exclusive news, analyses and opinion on Asian economies and financial markets

Asian Market Insights

Exklusive News, Analysen und Meinungen zu den asiatischen Finanzmärkten

Recovery prospects still dim

Tighter mobility restrictions reimposed by authorities in Metro Manila from August 6-20 could complicate the outlook for the second half of the year and further derail the economic recovery into recession, economists said. The country has recorded 1.67 million cases as of Tuesday, the second-highest caseload in Southeast Asia.

“We have turned more cautious about the short-term outlook following tightened mobility restrictions as well as softer exports amid Covid-related regional supply disruptions and weaker demand among some trading partners. We will be reviewing our 2021 GDP forecast of 4.8%,” Fenner mentioned in a report.

IMF’s 2021 growth forecast for the Philippines in July, was 1.5 percentage points lower at 5.4% from April’s projection. However, for 2022, IMF revised projections up by 0.5 percentage points to 7%.

Most analysts expect policymakers to keep key interest rates accommodative at their meet on Thursday.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno hinted on Monday the central bank’s resolve to maintain monetary policy accommodative as long as needed to ensure a strong and sustainable economic recovery from the pandemic led recession.

He expects a “strong recovery” growth of around 7.7% in 2022 and 6.5% in 2023.

More News

Historic pivot: Japan ends era of negative interest rates

0
After 17 years, the Bank of Japan is ending its negative interest rates policy, but market's reaction was rather unimpressed ...

Australia invests $550 mn in rare earths to lead energy transition

0
In a strategic move to strengthen its position in the global energy transition supply chain, the Australian government has a ...

India’s stock market cap to hit $10 tn by 2030

0
In January, India became the fourth-biggest equity market globally. The combined value of shares listed on Indian exchanges ...

Japan’s booming chip stocks drive Nikkei rally

0
After hitting an all-time high for the first time in 34 years in February, Japan's Nikkei Stock Average hit the key mileston ...