Coronavirus and bushfires tip Australia into first recession in 29 years
The country prepares for a tough year due to the effects of the coronavirus pandemic.
The Philippines economy fell into recession for the first time in 29 years, with a record slowdown in the second quarter as strict quarantine measures disrupted economic activity and forced the government to sharply cut its 2020 GDP forecast.
Official data showed that gross domestic product fell 16.5% in April-June from a year earlier – the largest decline since comparable GDP data was first recorded in 1981 – after falling 0.7 % in the first quarter.
The fall is much stronger than the projected 9% decline, making the Philippines the second largest country in Southeast Asia after Singapore to go into recession amid the coronavirus pandemic..
Domestic demand and business investment have been hit hard, while the government is forecasting the biggest annual GDP fall since 1985 this year, according to the Philippines Bureau of Statistics. Restrictions re-imposed this week in and around Manila to combat rising coronavirus cases.
«The Philippines’ economy plunges into recession with a collapse of GDP in the second quarter, showing the devastating impact of quarantines on a consumption-dependent economy», – said senior economist ING Nicholas Antonio Mapa.
Seasonally adjusted GDP fell 15.2% in the second quarter from the first three months of the year, while the government sharply lowered its growth forecast for 2020.
The Philippines was one of the fastest growing economies in Asia before the pandemic, but now the government expects its GDP to contract 5.5% this year – the largest annual drop in 35 years – compared to the previous forecast of a 2.0-3 decline. ,four%. Government sees economic recovery in 2021 and 2022.
The government has allocated about 655 billion pesos ($ 13.35 billion) to help citizens cope with the pandemic and 59 billion pesos to improve health care, but that has done little to ease the lives of populations facing record high unemployment..
The stock market in the Philippines largely ignored the published data and rose 1.2%, lagging behind its regional peers this year. Local currency closed slightly more firmly at 49.05 per dollar compared to 49.075 on Wednesday.
Is growing pressure on the country’s government to provide broader support given that the central bank has already cut interest rates to a record low this year and that economists see no room for further monetary easing as inflation rises.
«The worst is over, but we’re not out of the woods yet», – said on Thursday the head of the central bank of the Philippines (Bangko Sentral ng Pilipinas) Benjamin Diokno.
The central bank cut interest rates a total of 175 basis points this year to a record low of 2.25%.
Michael Ricafort, an economist at Rizal Commercial Banking Corp, said that «it is now much more difficult to continue to cut rates» while inflation hits a six-month high of 2.7% in July, higher than the central bank’s key interest rate.
Instead, political support should be provided by further reductions in banks’ required reserves, which will lead to an increase in liquidity in the market, or additional government incentives, economists say..