Philippine economic contraction could reach 5.3% -ADB

Philippine economic growth could now contract by as much as 5.3% this year, but the worst is likely over as businesses have gradually started to reopen, the Asian Development Bank (ADB) said Thursday.

At a virtual briefing, ADB Philippines country director Kelly Bird announced updated economic projections for the Philippines at -2.3% to -5.3%.

"Worst is most likely over now with the gradual opening of the economy," he said in a presentation to reporters.

"Several economic indicators suggest the economic contraction bottomed out in May 2020," he added.

The Philippine economy was placed in a standstill from March to May, when Metro Manila and other "high-risk" areas were placed under an enhanced community quarantine from March 17 to May 15, followed by a modified ECQ or MECQ until May 31.

Looser restrictions have since been in placed under the general community quarantine which was implemented starting June 1, and extended to last until July 31

First-quarter figures were reported at -0.2%, the weakest pace in at least two decades. Second-quarter data will be reported by the Philippine Statistics Authority next month.

"The second-quarter contraction will clearly be a deep one," Bird said, but noted this is likely the worst given that economic indicators such as the Purchasing Managers Index (PMI) posted a slight improvement in June.

According to the results of the IHS Markit monthly survey, the Philippines PMI rose to 48.7 in June from 40.1 in May, but still lower than the 51.3 recorded in June 2019.

The PMI is a composite indicator of the manufacturing sector’s performance, with 50.0 as the threshold. A reading above 50 indicates growth and below 50 is a contraction.

Moving forward, Bird said a 6.5% growth could still be achieved by 2021, as businesses recover from losses incurred due to the coronavirus pandemic.

Just last month, the ADB said it expects the Philippine economy to contract by 3.8% for 2020. -MDM, GMA News