MANILA, Philippines — The Philippines has slipped into a recession, as economic contraction likely deepened during the second quarter with the COVID-19 lockdown — at its peak in April and May — severely affecting production sectors, the country’s chief economist said Wednesday.

“Based on the Missi (monthly integrated survey of selected industries), LFS (labor force survey) and trade statistics up to May, it will be deeper than the first quarter,” Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua said in a text message, but he did not say by how much.

First-quarter gross domestic product (GDP) shrank by 0.2 percent year-on-year.

With two straight quarters of GDP contraction, the country fell into a recession during the first half — the first time since the full-year recession in 1998 with a 0.5-percent drop in GDP.

The government had projected GDP to decline by 2-3.4 percent in 2020, even as some private sector economists and most multilateral institutions estimated a bigger contraction for the entire year and even a double-digit drop in the second quarter.

Chua, who heads the state planning agency National Economic and Development Authority (Neda), last week said the economic team usually revisits their GDP projections whenever new data were available.

The Philippine Statistics Authority’s (PSA) latest Missi report showed that the volume of production index (VoPI)—a proxy for nationwide factory output—slid 59.8 percent year-on-year in April, a 20-year low.

The April round of the LFS had shown a 15-year-high unemployment rate of 17.7 percent—equivalent to 7.3 million Filipinos without work.

Exports and imports also dropped at their fastest pace in April—the first full month of the enhanced community quarantine (ECQ) imposed in Luzon and other parts of the country with high COVID-19 cases since mid-March.

While the ECQ, which extended until May, had put a halt to 75 percent of domestic economic activities, the less-restrictive general community quarantine (GCQ) in June left only 25 percent of businesses still unable to resume operations given social distancing and transportation restrictions remaining in place.

As the COVID-19 lockdown eased, the Philippines’ purchasing managers’ index (PMI) improved to 49.7 in June, still a year-on-year contraction but the highest reading in four months, London-based global information provider IHS Markit Ltd. said also on Wednesday.

A PMI below the neutral 50-mark reflected a decline in manufacturing activities, which the Philippines recorded since March when the ECQ was first implemented.

“The change in government COVID-19 rules to the GCQ helped the manufacturing sector make large strides towards stability in June. Most importantly, production was raised for the first time since before the lockdown which, while marginal overall, marked a significant milestone in the reopening of the sector,” IHS Markit economist David Owen said in a report.

“However, many firms did remain closed or operated at much lower capacity, suggesting that parts of the sector have some way to go to restore production to pre-pandemic levels. Demand also fell, although the rate of decline was far softer than in May. Firms have noticeably held back from hiring as a result of weak demand, as employment numbers dropped at the steepest rate since March,” Owen said.

“The sharper decline in workforces suggests that manufacturers may need to see a strong rebound in goods demand before job levels can expand. Signs from new orders and export orders data are encouraging, but the recovery may still be gradual as the pandemic continues and even accelerates in some regions,” Owen added.


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