Economy shrank deeper than reported in Q1, worse expected for April-June

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Metro Manila (CNN Philippines, August 5) – The Philippine economy shrank wider than initially reported in the first quarter, the Philippine Statistics Authority said ahead of the release of second quarter figures which is expected to confirm a local recession.

In a statement on Wednesday, the PSA said the contraction was worse at 0.7 percent for January-March compared to a year ago, wider than the initial -0.2 percent slide reported back in May.

The revisions came after the statistics agency recorded bigger downtrends in net primary income, or money flows coming from the rest of the world, as well as in the computation of gross national income as the Philippines grappled with the onset of the COVID-19 pandemic.

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PSA is authorized to revise economic data to reflect changes or late inputs not factored in during the original scope of reporting.

The gross domestic product represents the national output, or the value of the goods and services produced in the Philippines for a certain period. A contraction means economic activity is down compared to a year ago.

On Thursday The government will announce data on how the economy fared during the second quarter. Government officials and market analysts agree that the nosedive will be deeper as the period captures two full months of lockdown in major economic hubs.

More stores in malls were allowed to reopen starting mid-May, while more establishments were given the green light to resume limited operations in June and July like dine-in restaurants, salons, and personal care services.

On Tuesday, Presidential Spokesperson Harry Roque described the second-quarter decline as "napakatindi" or grave. Because of it, he added that the economy could no longer afford extending the fresh two-week lockdown imposed in Metro Manila and nearby provinces of Bulacan, Rizal, Laguna, and Cavite, which together account for more than two-thirds of national output.

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Consumer spending, which accounts for 75 percent of GDP, is seen slumped as people are forced to stay home or avoid heading out amid fear of getting infected.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno said the second-quarter contraction will be the worst this year, adding that the downtrend will be slower in the coming months as people adjust to post-pandemic conditions.

"GDP growth is expected to recover in 2021 as government policy support measures fully gain traction," said Diokno, who served as Budget chief before heading the central bank.

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The economic team expects the full-year contraction at 3.4 percent, but that figure will likely be revised also on Thursday as they face the media hours after the release of the latest PSA data.

Acting Socioeconomic Planning Secretary Karl Kendrick Chua said separately in a statement that latest manufacturing and global trade data also suggest signs of recovery. Both factory output as well as goods imports and exports saw slower contractions compared to May, which meant that economic activities may be slowly returning to normal.

Agricultural output managed a 0.5 percent growth from April-June as farm activities continued, being tagged as essential sectors. Total production rose by 4.6 percent to ₱439.8 billion, the PSA said.