Subdued rebound in Q3 seen

MANILA, Philippines — A subdued pace of recovery can be expected in the third quarter after economic activity stagnated in July, said UK-based Oxford Economics.

In a recent report, the think tank said that despite the solid gains in May and June, momentum failed to pick up in July as seen in the diminished capacity utilization in industry and declining imports.

Oxford Economics said these indicators at the start of the third quarter “reflected a disappointingly sluggish initial recovery in domestic demand.”

“Our growth tracker for the Philippines shows that activity bottomed out and is on course towards recovery. But despite solid gains in May and June, momentum stagnated in July,” the report said.

A study conducted by the government with the World Bank showed that around 40 percent of firms in the country remained closed at the start of the second semester, with most expressing a high degree of uncertainty in the months ahead.

Despite the easing of community quarantine operations in June, firms reported a steep reduction in sales revenue, as much as 64 percent on average between April and July.

To cope with diminished earnings, half of the firms reported to have reduced payment to their employees or reduced the number of their workers.

In August, a strict community quarantine was imposed anew for two weeks in Metro Manila and surrounding areas, forcing businesses that have just reopened to close down anew.

“While fiscal policy will provide a boost to domestic demand and exports should continue to recover in coming months, we expect the pace of recovery to be relatively modest as subdued remittances, uncertainty, and a weak external outlook weigh on demand,” said Oxford Economics.