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Philippines economy shrinks in third-quarter, govt says 'worst is over'

GDP grew a seasonally adjusted 8% quarter-on-quarter, after a 14.9% contraction in April-June

Philippines | economy

Reuters  |  MANILA 

economy, growth, gdp, coronavirus
The data showed household spending and investment continued to suffer while government spending slowed. Illustration by Binay Sinha

By Neil Jerome Morales and Enrico Dela Cruz

MANILA (Reuters) - The Philippine shrank by more than expected in the third quarter from a year ago as the COVID-19 pandemic continued to batter the Southeast Asian country but a loosening of curbs helped ease the pain.

Gross domestic product (GDP) shrank 11.5%, the statistics agency said on Tuesday, after a 16.9% slump in the second quarter when the entered its first recession in nearly 30 years. Economists in a Reuters poll had forecast a 9.8% year-on-year contraction.

GDP grew a seasonally adjusted 8% quarter-on-quarter, after a 14.9% contraction in April-June.

The government has gradually lifted curbs since May after imposing one of the strictest lockdowns globally this year. But analysts worry about the Philippines' outlook as it struggles to contain the virus at home, while a resurgence of cases abroad threatens the global economic recovery.

"The economic team is optimistic that the worst is over for the country," said Acting Economic Planning Secretary Karl Chua, projecting a "strong bounce-back" in 2021.

The data showed household spending and investment continued to suffer while government spending slowed. Household spending fell 9.3% in the third quarter from the year before and investment slumped 37.1% over the same period.

"Improvements are likely to be harder to come by in the quarters ahead," said Alex Holmes, Asia economist at Capital Economics. "With the virus still not under control, a further scaling back of containment measures will take longer."

HSBC economist Noelan Arbis expected the central bank to keep rates steady for the rest of 2020, but ING senior economist Nicholas Mapa said the data could prompt a knee-jerk move.

The central bank cut interest rates by a total of 175 basis points this year while the government has launched 165.5 billion pesos ($3.4 billion) worth of stimulus measures.

"With fiscal authorities pulling back on spending at a time we need it the most, monetary authorities may be compelled to trim rates but at this point, it may be the less effective response," ING's Mapa said.

Government spending rose 5.8% in the third quarter from a year ago, compared with a 21.8% surge in the second quarter.

The has the second-highest number of cases and COVID-19 deaths in Southeast Asia.


(Reporting by Neil Jerome Morales and Enrico Dela Cruz; Editing by Ana Nicolaci da Costa)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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First Published: Tue, November 10 2020. 10:57 IST