BSP governor expects PH to go into technical recession due to COVID-19

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Metro Manila (CNN Philippines, April 2) – The COVID-19 pandemic cut growth prospects for economies across the globe, and the Philippines was not immune.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said he expects the Philippine economy to go into a technical recession this year, which means the country will experience negative growth for at least two quarters.

“Maybe in the first quarter, we’ll still be positive," Diokno said in an interview on CNN Philippines.

"Then we go into negative in the second quarter and possibly the third quarter, and then we’ll pick up in the fourth quarter," he added.

In a report released on Tuesday, the World Bank slashed its growth estimates for the Philippines, citing the importance of tourism and trade to the country's economy, which are now hampered by strict travel restrictions put in place to curb the spread of COVID-19.

"Real GDP growth is projected to significantly decelerate from 5.9% in 2019 to 3.0% in 2020 due to the impact of the COVID-19 outbreak and the associated community quarantine," the World Bank report said.

The report also noted the economy may see negative growth, as much as 0.5 percent, if the Luzon-wide enhanced community quarantine is extended past mid-April.

Diokno noted that revenues of the national government have been adversely affected by the Luzon-wide quarantine. In response, the BSP lent the national government ₱300 billion pesos for its stimulus plan.

“We also entered into a [repurchase] agreement with the Bureau of the Treasury. This will be good for three months, extendable for another three months,” Diokno said when asked what additional measures the BSP will implement to help keep the economy afloat.

The central bank slashed the reserve requirement for banks by 200 basis points, releasing approximately ₱180 to ₱200 billion pesos into the economy.

Banks and other lending firms use the BSP rates as their benchmark in setting loan, credit card, and deposit rates.