Economic recovery to start in 4th quarter, Diokno says

ECONOMIC RECOVERY is likely to start by the fourth quarter, with growth seen in key sectors such as agriculture and construction, Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno said on Monday.

“I expect to see some growth in Q4 — agriculture, construction, manufacturing, and public administration,” Mr. Diokno said in a text message to BusinessWorld.

The economy contracted by 0.2% in the first quarter of the year, weighed down by the Taal eruption, the coronavirus outbreak and the subsequent lockdown.

The second quarter is expected to be worse, with the economy seen slipping into a recession. A recession is defined as two straight quarters of negative economic growth as measured by gross domestic product (GDP).

Despite easing of lockdown and resumption of business activity, Mr. Diokno still expects a GDP contraction, albeit slower, in the third quarter.

“I think the recovery will start in the fourth quarter. I think economic contraction could persist until Q3, although at a slower pace compared to the second quarter as business operations gradually resume,” he said in an interview with ABS-CBN News Channel.

The government sees GDP shrinking by 2-3.4% this year, before bouncing back in 2021 with a growth of 8-9%.

Mr. Diokno, a former Budget secretary, previously said the government will need to focus on the labor market to rescue the economy. He suggested a supplemental budget could better support this effort in order for fiscal stimulus to catch up with the monetary measures by the central bank.

The Congress has yet to approve key stimulus bills. The COVID-19 Unemployment Reduction Economic Stimulus (CURES) bill sets aside P1.5 trillion for infrastructure projects that will create jobs. Projects will focus on priority areas such as health, education, agriculture, local roads and infrastructure and livelihood.

The Accelerated Recovery and Investment Stimulus for the Economy of the Philippines (ARISE) bill, on the other hand, allotts P1.3 trillion for COVID-19 response.

“As economic growth is expected to contract significantly for the year, an expanded fiscal policy response will play an important role in stabilizing the economy and nudge more industries into recovery mode,” Security Bank Corp. Chief Economist Robert Dan J. Roces said in a text message.

He said fiscal policy moves will be a “good complement” to the monetary policy response, which could in turn boost consumption that will benefit both the private and public sector.

UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said a recovery by the fourth quarter is possible taking into account the efforts to reopen the economy and the continuation of the government’s infrastructure program.

However, Mr. Asuncion said a possible second wave of infections should also be priced in when talking about economic recovery.

“The swift recovery hinges on how the government handles the health aspect of the containment efforts. If the spread of the virus is effectively contained, economic recovery will be brisk,” he said in a text message. — Luz Wendy T. Noble