MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is looking at a smaller gross domestic product (GDP) contraction of nine percent in the third quarter and a further recovery with possible growth in the fourth quarter as the economy continues to reopen after the country adopted one of the longest and strictest lockdowns to prevent the spread of COVID-19.
BSP Governor Benjamin Diokno said in an interview with Bloomberg TV that the worst is over for the Philippine economy after contracting by a record 16.5 percent in the second quarter from 0.7 percent in the first quarter.
“The second quarter was bad because the economy was practically shut down,” he said.
The Philippines slipped into recession in the second quarter as Luzon was placed under enhanced community quarantine in the middle of March to prevent the rapid spread of the coronavirus.
The economy partially reopened in June as the National Capital Region (NCR) shifted to general community quarantine but Metro Manila and nearby provinces reverted to a stricter modified enhanced community quarantine from Aug. 4 to 18 as COVID-19 cases doubled to above 200,000.
The BSP chief noted things are picking up and the third quarter economic performance would be better than the second quarter, and the fourth quarter better than the third quarter.
“The third quarter will be less negative than the second quarter, maybe negative nine percent, but we see some possible growth in the fourth quarter,” Diokno said.
Diokno said the manufacturing sector in the country has started to recover as the country’s purchasing managers index (PMI) improved to 50.1 percent in September from 47.3 percent, signaling an expansion.
The GDP contracted by nine percent in the first half.
Economic managers now expect a deeper GDP contraction of 4.4 to 6.6 percent instead of two to 3.4 percent this year and a slower recovery with a growth of 6.5 to 7.5 percent instead of eight to nine percent next year.
“As I said, for as long as the crisis is ongoing, this is not a sprint, this is a marathon so I think we won’t ease until maybe we see things normalize which means unemployment should be around five percent and growth at maybe around six percent,” the BSP chief said.
The central bank’s Monetary Board has approved the request of the national government for an additional provisional advance of P540 billion to beef up its COVID-19 war chest after fully paying the initial P300 billion availed last March.
Diokno believes the country has flattened the COVID curve and does not expect a second or third wave, while health facilities have been augmented during the lockdown.