BSP sees GDP downturn to bottom out in Q2

The current assumptions for the economy and other indicators remain unchanged even as Metro Manila and nearby other areas  returned on Tuesday to the stricter lockdown and containment measures under modified enhanced community quarantine (MECQ).

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said the shift from general community quarantine (GCQ) to modified enhanced community quarantine (MECQ) should still indicate the same projections.

 “A two-week switch from GCQ to MECQ for Greater Metro Manila won't make a material difference,” he said Monday. “The economy is expected to hit rock bottom in the second quarter (while) the third quarter will be better than the second quarter, and the fourth quarter will be much better than the third quarter. It will still be ‘hockey stick’ like (economic recovery).”

 Diokno reiterated that the pandemic which has forced Luzon and major locations to go on lockdown and containment since mid-March of this year is a public health issue “with monumental economic implications.”

 “The term ‘public’ means that each individual has a role to play in mitigating the adverse impact of the crisis on loss of lives, jobs, and incomes. The behavior of individuals is an important part of the solution to this unprecedented crisis. Finding a solution to this pandemic, like malaria and tuberculosis eradication, takes the form of a public good — even an international public good, where developed countries may choose to assist less developed economies,” said Diokno.

 The BSP chief said this is the reason the United Nations and the World Health Organization in particular, has emphasized the importance of coming up with an anti-COVID-19 vaccine as soon as possible. “(They are) crucial in finding a timely and sustainable solution to this crisis,” said Diokno.

 During the BSP’s regular “GBED Talks” virtual press chat last week, Diokno has said that “the worst is over” after a second quarter’s expected lowest point in this year’s economic recession. He even assured the public – and this is before the return to the MECQ – that Filipinos “will probably have a very nice Christmas” this year.

 The government expects a GDP contraction of 3.4 percent to two percent for 2020 and an economic rebound in 2021 of eight to nine percent, and in 2022 of six to seven percent.

In the first quarter this year, the GDP contracted by 0.2 percent from 6.7 percent in the previous quarter and 5.7 percent in the previous year, and it was the first time the economy contracted since 1998.

President Duterte heeded the call of the healthcare sector who has made an appeal for a break and to assess the rising numbers of COVID-19 infected which has passed the 100,000 mark over the weekend.

The shift back to the MECQ which is more relaxed than the ECQ in March and April, will be implemented August 4 until August 18. In May, most areas were under MECQ and by June until July, the quarantine status was lifted to GCQ which opened 75 percent of businesses.

ING Bank senior economist Nicholas Mapa, in the meantime, has a grimmer view of events as he thinks the GDP momentum has been set back with the two-week MECQ, and that the economy is “headed into a severe crash landing with the probability (of) returning to its former glory any time soon now declining by the day.”  “With the economic growth engine crippled, the continued spread of the virus weighs on any hopes of a recovery,” said Mapa. “Now back to MECQ, authorities must spend yet again to safeguard the lives of its citizens via cash aid and dole outs, negating any savings made by holding back on spending in the first half of the year. Repeated returns to lockdowns will eventually take its toll both on the economy and the fiscal position of the Philippines.”