The Bank of the Philippine Islands (BPI) further downgraded its Philippine economic growth outlook this year after factoring in current and recent developments, including natural calamaties that struck the country in the last several weeks.
In a report on Thursday night, BPI Vice President and lead economist Emilio Neri Jr. said the Ayala-led lender now forecast the country’s gross domestic product (GDP) to shrink by 11 percent for full-year 2020, worse than its earlier projection of a 9.3-percent contraction.
BPI revised its outlook, he added, “mainly to take into account the [country’s] gradual recovery from the [coronavirus disease 2019 (Covid-19)] pandemic, the severe impact of recent typhoons and the underspending of the government.”
The bank’s latest projection is worse than the government’s revised assumption of a 5.5-percent contraction for 2020.
It is also worse than all the GDP estimates earlier compiled by The Manila Times: ING Bank Manila’s -10.8 percent, Rizal Commercial Banking Corp.’s -9.5 percent to -10 percent, Security Bank Corp.’s -9.9 percent; Fitch Ratings’ -9.6 percent, S&P Global Ratings’ -9.5 percent, Capital Economics’ -9.5 percent, Fitch Solutions and ANZ Research’s -9.1 percent, the International Monetary Fund’s -8.3 percent, the Asian Development Bank’s -7.3 percent, Moody’s Investors Service’s -7 percent, and the World Bank’s -6.9 percent.
The Philippines remained in recession after domestic output slid by 11.5 in the third quarter, 16.9 percent in the second and 0.7 percent in the first. This brought the contraction in GDP to 10 percent in the first nine months.
The National Economic and Development Authority (NEDA) earlier projected that the typhoons that hit the Philippines recently — “Quinta” (international name: Molave) and “Rolly” (Goni) in late October and “Ulysses” (Vamco) in the first half of November — might pull down the country’s GDP by 0.15 percent, or P90 billion in value.
Latest data from the Bureau of the Treasury showed that state spending in the first 10 months of the year surged by 12.75 percent to P3.31 trillion from P2.93 trillion in the same period in 2019.
Despite this, Neri said “government spending has been anemic in recent months, following the 50-percent jump in the second quarter,” noting that such spending slipped to P289.6 billion in October from P310.8 billion a year ago.
“This is the second month in a row that government spending declined year-on-year following the 15.5 percent drop in September,” he added.
The BPI official added that bad weather last month might have delayed the implementation of infrastructure projects, which contributed to the lower spending.
Another double-digit decline in domestic output is possible this quarter if the government continues to underspend, Neri warned.
He said the latest GDP report suggested that consumer confidence remained weak and its recovery would likely take a long time. Meanwhile, private businesses would not spend on expansion in an environment where consumer demand is weak.
“The government is the only institution right now that has the capacity to spend… Without a strong fiscal response, the economy may contract by around 13 percent year-on-year in the fourth quarter,” Neri added.