By Lawrence Agcaoili, September 1, 2020; The Philippine Star
MANILA, Philippines — British banking giant HSBC warns of a possible double-dip consumer recession in the Philippines after Metro Manila and nearby provinces reverted to a stricter modified enhanced community quarantine (MECQ) as coronavirus disease 2019 or COVID-19 cases soared in August.
In its latest ASEAN perspective, HSBC chief economist Joseph Incalcaterra said prospects for an economic recovery for the Philippines in the third quarter has softened.
“In the Philippines, there is a risk of a double-dip consumer recession given new lockdowns,” Incalcaterra said.
The Philippines has imposed the longest and most stringent lockdown in the region to curb the spread of COVID-19. The entire Luzon was placed under the strictest enhanced community quarantine in mid-March, but this was relaxed in June as the National Capital Region (NCR) shifted to a general community quarantine.
However, Metro Manila and nearby provinces were placed under the stricter MECQ from Aug. 4 to 18 as COVID-19 cases soared above 200,000 from only 100,000 last Aug. 2
“In the case of the Philippines, a severe lockdown was enforced for nearly two months of the second quarter and was reimposed in Manila in early August,” he said.
The economy stalled and the gross domestic product (GDP) contracted by nine percent in the first half after shrinking by a record 16.5 percent in the second quarter from 0.7 percent in the first quarter due to the containment measures. It last contracted by 0.5 percent in 1998 due to the Asian financial crisis.
As a result, the Development Budget Coordination Committee (DBCC) is now looking at a deeper contraction of 4.4 to 6.6 instead of two to 3.4 percent this year, and a slower rebound with a growth of 6.5 to 7.5 instead of eight to nine percent next year.
“Lockdowns are bad news for economies driven by consumption,” he said.
Incalcaterra added the collapse in investments in the first half resembled the dark days of the Asian financial crisis.
He said private consumption fell nearly 50 percent in the Philippines in the second quarter, somewhat offset by the surge in public investment.
“In the Philippines, the mix of lockdowns coupled with the worst outbreak in the region, will significantly limit a significant recovery in the third quarter,” Incalcaterra said.
He said the sharp deterioration in the domestic labor with an unemployment rate at a record 18 percent, and the reduction in remittances from overseas Filipino workers (OFWs), reaffirm a bleaker outlook.
HSBC sees the country’s GDP contracting by 11.1 percent in the third quarter, and by 9.4 percent in the fourth. It expects the domestic economy to contract by 9.6 percent this year after growing by six percent last year.
For 2021, the British banking giant expects a rebound with a growth of 5.7 percent, despite a contraction of 1.5 percent contraction in the first quarter.