Longest Asia lockdown batters economy

The tepid fiscal support in the Philippines and Indonesia combined with rising COVID-19 cases means that these economies may likely be the laggards for recovery without significant increases in fiscal support

Countries in the Asia Pacific region are forecast to bounce back in the third quarter and accelerate some more next year, except for the Philippines, the data analytics unit of Moody’s Investors Service said on Friday.

Moody’s analysts said and anticipated laggard status of the Philippines in the region may be blamed on the government decision to impose “one of the longest and strictest lockdowns” in the region, which effectively denied the economy to nourish itself and grow like its peers in the region.

As a result, the hoped-for economic expansion could lag for some time later and not sooner, the analysts said.

Amid the government’s decision to extend its quarantine measures, which proved to lock a significant portion of the economy, recovery in gross domestic product (GDP) terms might experience a lag, Moody’s Analytics chief economist for Asia Pacific, Steve Cochrane, said.

The Philippine Statistics Authority recently announced a 0.2 percent GDP contraction in the first quarter as partial impact of the two-week lockdown during the period.

Various private and government sector economists agree that a “deeper” dive into the negative territory could be expected in the second-quarter GDP numbers, technically placing the economy in a state of recession.

According to Cochrane, the travel and tourism sector are the slowest components to recover from the ongoing crisis and given their economic significance to the Philippines, the government needs to further support the industry.

FConchrane said economic recovery in the Philippines may be delayed until 2021.

“The tepid fiscal support in the Philippines and Indonesia combined with rising COVID-19 cases means that these economies may likely be the laggards for recovery without significant increases in fiscal support,” he explained.

Cochrane cited likely risks to the outlook, including the possibility of a second wave of the pandemic, weak global consumer and investor sentiment and continued sluggish trade patterns.

Earlier, multilateral lender Asian Development Bank offered a better outlook for the Philippines, noting the GDP contraction may have already peaked in May and will then be followed by a “soft rebound” over the succeeding quarters.

The government expects GDP this year to contract by 2 to 3.4 percent followed by a strong 7.8 percent recovery next year.

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