Emerging Asia economies face deeper slump in Q2

MANILA, Philippines — Most countries in Emerging Asia, including the Philippines, should brace for double-digit declines in economic growth in the second quarter as recovery will likely be slow even after lockdown restrictions are lifted, according to  London-based Capital Economics.

In a new report, the macroeconomy research firm said first quarter gross domestic product (GDP) growth figures released recently already point to a more severe decline in the second quarter.

This is also supported by the reflection of collapse in global demand only in April.

“The Q2 figures will be much worse, given that in many cases, lockdowns were only introduced in late March. Meanwhile, the collapse in global demand only started to show up in the merchandise trade figures from April. Most countries are likely to experience double-digit declines in GDP this quarter,” said Capital Economics.

Other countries expected to register double-digit economic contractions are Malaysia, Singapore, Thailand and Hong Kong.

Indonesia, Taiwan and Korea meanwhile, will have slower declines.

Capital Economics noted that while signs of slowing infection rates across the region were “encouraging,” recovery would be slow because people would still be cautious about resuming normal activities after lockdowns are eased or lifted, therefore dampening consumption.

“Despite new cases being brought under control and restrictions being lifted, people remain cautious about returning to their pre-crisis lives,” said Capital Economics.

 The Philippine economy contracted by 0.2 percent in the first quarter, its weakest growth since 1998, after several economic shocks in the beginning of the year.

Gross domestic product (GDP) growth in the first three months fell markedly from the revised 5.7 percent in the same period last year and 6.7 percent in the fourth quarter a year ago.

Contraction was seen in agriculture and industry while a significantly weaker growth was seen in the services sector.

Despite coming from a high growth trajectory in the past year, the economy took a beating after it was hit by a succession of unexpected shocks during the quarter beginning with the eruption of the Taal Volcano in January, the significant decline in tourist arrivals because of travel restrictions related to the COVID-19 pandemic in February and finally the imposition of the Luzon-wide enhanced community quarantine that strictly limited the mobility of people and goods in the country’s main island mid-March.

The National Capital Region will remain under a strict community quarantine until at least May 15 although a less severe community quarantine is now being enforced in several provinces where the risk of transmission of the new coronavirus disease is lower to allow the resumption of economic activities.