(Bloomberg) — The Philippines’ economic contraction moderated in the third quarter by less than forecast, signaling an unsteady recovery from the pandemic even as movement restrictions were relaxed and businesses reopened.
Gross domestic product shrank 11.5% in the three months through September from a year earlier, an improvement from the second quarter’s revised 16.9% drop. The median forecast in a Bloomberg survey of 20 economists was for a 9.6% decline.
Compared to the previous quarter, the economy expanded 8%, below the median estimate of 8.9% among seven economists surveyed, Tuesday’s data showed. The first sequential growth this year shows the economy is on the mend heading into 2021, Acting Economic Planning Secretary Karl Chua said.
“The economic team is optimistic that the worst is over for the country,” Chua said, adding that officials would reassess their economic projections in light of Tuesday’s data. “The path is clearer to a stronger bounceback in 2021.”
The peso fell 0.2% to 48.25 per dollar as of 11:08 a.m. in Manila. The country’s benchmark stock gauge rose more than 3%, joining a rally in Asia on vaccine optimism.
The quarter-on-quarter growth comes after two straight periods of contraction, including a revised 14.9% drop in the second quarter, when the economy entered recession amid Southeast Asia’s second-worst Covid outbreak.
“While growth is going in the right direction, it will take a while until pre-pandemic production is attained,” said Eugenia Victorino, head of Asia strategy at Skandinaviska Enskilda Banken AB in Singapore. “The risk is the longer the recovery takes, the more permanent the destruction of incomes become. This will cap growth momentum going forward.”
Consumer and business sentiment remain weak after a stricter quarantine was reimposed in Manila for two weeks in August. Unemployment rose in the capital region, which accounts for about a third of the economy, even as the nationwide jobless rate eased in July from a record high in April.
What Bloomberg Economics Says…
“Another double-digit slump in Philippine GDP underscores the challenge of reviving the economy amid an uncontained virus outbreak, ongoing containment measures and restrained fiscal support. While the loosening of movement restrictions should help to release some pent-up demand in the months ahead, we anticipate the economy will remain in annual contraction in 4Q.”
— Justin Jimenez, Asia economist
No major sector performed strongly in the third quarter, according to Nicholas Mapa, economist at ING Groep NV.
“More worrisome is the sustained weakness in capital formation, which points to fading potential output and slower growth for quarters to come, no matter how much government pushes to reopen,” he said.
Tuesday’s data showed:
- The agricultural sector expanded 1.2% year-on-year
- Industry contracted 17.2% compared to a year earlier
- Services were down 10.6% from the year-ago period
The central bank, which is scheduled to review monetary policy Nov. 19, will likely retain its easing measures until long-term economic growth and job targets are reached, Governor Benjamin Diokno said Nov. 5. So far this year, the bank has cut its key rate by 175 basis points, eased some lending rules and boosted money supply.
The government is banking on next year’s record 4.5 trillion-peso ($93.5 billion) budget to boost an economy expected to contract by as much as 6.6% this year. Timely passage of the budget is crucial in attaining the 6.5%-7.5% growth projection for next year, with Chua estimating that each day of delay results in 1.1 billion pesos not spent.
Chua said the government won’t revert to stricter curbs on movement to fight the pandemic, and will instead pursue a strategy of implementing minimum health standards.
“Managing risks instead of avoiding them will allow us to safely open more of the economy,” he said. “This will also put the Philippines on its solid growth and development trajectory.”
(Updates market levels in fifth paragraph, adds bullet points.)
©2020 Bloomberg L.P.
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Through late summer and early fall, Tim Ball spent as much time as possible underwater in his dive gear, scouring the seabed off the Burin Peninsula for scallops.
It’s an ocean-to-table operation that sees his hand-harvested scallops quickly making their way to dinner plates in the downtown of St. John’s.
“I try to keep it all local,” said Ball about his business philosophy.
With a provincial economy that’s in dire straits and in need of reversing its course, Ball thinks every little bit can help— especially if the focus is keeping as many of those little bits as possible in the province.
For Ball, that means, among other things, using locally made bags and boxes for packing his scallops and using a Burin Peninsula cab company for sending his catch into St. John’s.
“Because this is a primary industry … we are in, and we are getting the actual resources from the bottom, this is creating new money for the economy,” Ball said. “If the money is staying in Newfoundland, then great.”
Terre Restaurant in St. John’s is one of the destinations for Ball’s scallops. Before the season ended last month they could be found listed on the menu as “Seared Diver Scallops.”
“They’re amazing,” said head chef Matthew Swift.
“Anywhere else in the world … the idea of marketing day boat scallops is sort of a pipe dream. If I were to tell friends in other places that Tim gets out of the water, and I get the scallops in as long as it takes to drive in from Burin? It’s insane,” he said.
On top of the quality, it’s Ball’s business recipe that also interests Swift.
“Just in terms of having a diverse and smaller economy, where we can support people on a more individual level,” he said.
This way of thinking is something that also strikes a chord with John Schouten — Memorial University’s Canada Research Chair in Social Enterprise.
Schouten says Ball’s operation means more than just local spending on his supply chain. There’s also a spillover effect which would also see Ball spend money at local businesses in and around Garnish, where he fishes from.
“So every hundred dollars that passes from me, to you, to somebody else here locally, that $100 is working the whole time in our favour here in the province,” said Schouten in an interview last month.
Patch the bucket
It may be a small example, but there’s a bigger lesson in it for the provincial government, said Schouten. He thinks the government should treat the economy like a leaky bucket, where money comes in and goes out.
“If the government could, using that metaphor, start patching the bucket to keep the money in the province longer, working harder for local businesses, local people, people who are making a living wage — that would do wonders for the stability of the economy here,” he said.
Speaking of helping the economy, Ball thinks what he’s doing is scalable. In addition to scallops, Ball also hand harvests sea urchin, but he thinks there’s more that can be harvested as well — including kelp, sea cucumbers and periwinkles.
For that to happen, there would have to be consistent licensing periods from the federal government and more divers with commercial dive training.
Eventually Ball would like to see a special school that trains up to a dozen divers a year for this type of work.
If a community had a handful of divers, Ball said, the economic spin-off is easy to see — you need people shucking scallops and spotting the divers, gear needs repairing, supplies need to be bought.
“I think it’s just a win-win situation for small communities,” he said. “It could be a good economic boon.”
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