Economists predict 7.7%-10.9% 2Q GDP growth

Published August 6, 2021, 3:51 PM

by Lee C. Chipongian

The country’s gross domestic product (GDP) possibly grew by 7.7 percent or a high of 10.9 percent during the second quarter 2021 on base effects despite hits on employment and manufacturing due to the lockdown in the second quarter, economists said.

Makati CBD skyline

ING Bank economist Nicholas Mapa said the Philippines will likely post double digit year-on-year growth in the second quarter of 10.9 percent but will register a negative 1.5 percent quarter-on-quarter. The government is expected to announce the second quarter GDP performance on August 10.

Security Bank Corp.’s own economist, Robert Dan Roces, forecast a more moderate 7.7 percent year-on-year GDP growth for the second quarter but unlike Mapa, he also sees a growth of 5.1 percent on a quarterly basis.But adjusted for seasonality, he said they estimate a quarter-on-quarter GDP of a negative 1.4 percent using pre-pandemic trends.

“With the Philippines headed for yet another lockdown, and one that may be more stringent and protracted than the Alpha variant version, we are expecting the Philippines to post flat to negative quarter-on-quarter GDP growth in the third quarter as well,” said Mapa. He added that “in a year that started with so much hope for a ‘strong recovery’, 2021 is indeed turning out to be like 2020 with the Philippines likely headed for a lower growth trajectory once base effects fade.”

ING is projecting a full-year GDP of 3.8 percent, down from its previous 4.7 percent estimate, and it assumes a four-week enhanced community quarantine (ECQ) style lockdown in August, said Mapa.

In the meantime, Roces said the quarter-on-quarter growth may have improved by 5.1 percent with “steady increments in household consumption that was offset by the ECQs for most of the second quarter 2021”. He cited the Philippine Manufacturing Purchasing Managers’ Index or PMI’s average decline during the period while unemployment averaged eight percent and could stay elevated for some time.

“For the quarters ahead, growth is still expected to improve gradually but remains to be more of a function of improved business and consumer confidence on the back of steady vaccination rates,” said Roces. Next year’s May national elections will boost spending as well.

Both Roces and Mapa said the country’s third ECQ this month is a GDP set back.

“(The) reimposed ECQ this August may complicate the overall growth picture though, and the Philippines will be hard-pressed to hit the 6-7 percent GDP growth target,” said Roces.

Mapa, for his part, said it is a “case of one step forward and two steps back” for the recovery growth story.

“The Philippines will likely post double digit year-on-year growth but quarter-on-quarter GDP will possibly be negative. Base effects will likely carry year-on-year growth to double digit growth given the steep 16.9 percent year-on-year contraction (-14.9 percent quarter-on-quarter) suffered in the second quarter 2020,” noted Mapa.

“All sectors are expected to post growth led by capital formation, government spending and household consumption (but) despite the headline grabbing year-on-year print, the economy is expected to have slowed relative to the first quarter as tighter mobility curbs were implemented for all of April and most of May. The impact of such measures manifested immediately in employment and manufacturing numbers and we expect quarter-on-quarter GDP to have actually contracted by 1.5 percent,” he explained.

The Philippines has reported five quarters of negative growth since the pandemic was declared a global public health crisis in February 2020. It posted a 4.2 percent GDP contraction in the first quarter 2021. Last year, GDP contracted by a full-year 9.5 percent.