With Metro Manila and neighboring provinces returning to tight lockdown protocols. It was because the government is struggling to curb coronavirus (COVID-19) infection, but it is unlikely that the Philippine domestic economy can rebound this second half.
Another reason was that job losses rise and consumer spending weakens further in Metro Manila.
The year-on-year contraction of 16.5 percent of gross domestic product ( GDP) in the second quarter. As a matter of fact, the country’s worst performance in recent history. Then, it has also evoked concerns that the government’s credit rating may inevitably deteriorate given its unwillingness. It aimed to endorse a larger fiscal stimulus during this pandemic.
3.9% Dropped from the Previous Growth
British banking giant HSBC now expects the Philippine GDP to contract by 9.6 percent this year. It was worse than the 3.9-percent drop previously projected.
After that, it forecasts GDP to recover by just 5.7 percent in 2021. In addition, it was downgrading its projection from the previous growth outlook of 7 percent.
“The Philippines now appears to be one of the worst-hit economies from COVID-19, prompting us to revisit our GDP assumptions. The continued rise in COVID-19 cases domestically remains a serious concern. And in our view, it has dashed any hopes for a meaningful recovery in the second half of 2020. Moreover, the absence of a big-ticket stimulus is likely to put a damper on the recovery in the year ahead,” HSBC said in a research note issued on Monday.
Following the weaker than anticipated economic downturn in the second quarter, the Fitch Solutions think tank sharply downgraded its full-year 2020 real GDP outlook. Moreover, it was for the Philippines to a downturn of 9.1 percent from an earlier estimate of a milder 2 percent fall.
The domestic economy will slowly resume activity by yearend in the base case scenario of Fitch Solutions. In addition, the domestic activity will be considerably weaker than previously assumed.
By 2021, it expects the economy to rebound marginally down from the previous estimate of 6.5 percent, with a government-led investment push bringing growth to 6.2 percent per year.
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