,Philippines

Philippine economy contracts 0.2% in Q1

The contraction was due to the Taal volcano eruption and lockdowns brought by the pandemic.

Philippines’ GDP contracted by 0.2% YoY in Q1 2020 compared to the 6.7% YoY increase in Q4 2019, according to a report by UOB. This is said to be the country’s first decline since 1998.

The contraction was primarily caused by the Taal Volcano eruption, declining Chinese tourist arrivals and trade due to lockdown in Wuhan, and the enhanced community quarantine (ECQ) measures in mainland Luzon and other parts of the country.

On a seasonally adjusted QoQ basis, real GDP plunged 5.1% in Q1 compared to the 1.8% increase in Q4 2020, said to be the worst QoQ performance on record.

Almost all sectors, except for utilities & waste management and services, posted negative growth. Mining and quarrying sector registered the biggest fall with a drop of 22.3% YoY.

Manufacturing activities fell for the first time since 2009 by 3.6% YoY due to lower production of electrical & electronics products (-7.5%), petroleum coke & refined petroleum products (-35.5%), beverages (-8.2%), other non-metallic mineral products (-16.1%), and transport equipment (-11.1%).

The construction sector tumbled by 1.8% YoY whilst the agriculture, hunting, fishery, and forestry sector inched down 0.4% YoY due to the decline in crop production.

In addition, the services sector continued to see positive expansion but still registered its lowest growth rate since 1998 with accommodation & food services falling 15.3% YoY. Transport & storage and other services also declined by 10.7% and 7.6% YoY, respectively.

Meanwhile, wholesale & retail trade increased 1.1% YoY, but slipped 7.4ppt from Q4 2019’s 8.5% YoY. The annual growth of utilities & waste management sector also moderated to 5.3% YoY from 7.3% YoY in Q4 2019 on account of sluggish waste management activities with a 8.9% YoY contraction.

The report further notes that the lockdown that started on 17 March cost the economy $19.6b (PHP700b) through business closures, and could cost as much as $30.8b (PHP1.1t) should there be no economic expansion this year.

The country’s GDP is now expected to contract at a steeper pace by 12.5% YoY in Q2 whilst the 2020 full-year growth outlook for the Philippines is now a decrease of 3.5% from the previous forecast of 1% increase.
 

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