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Philippine Economy Signals Shaky Rebound From Worst of Virus

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(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

Fading Potential

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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Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

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OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.

Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.

Business, building and support services saw the largest gain in employment.

Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.

Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.

Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.

Friday’s report also shed some light on the financial health of households.

According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.

That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.

People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.

That compares with just under a quarter of those living in an owned home by a household member.

Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.

That compares with about three in 10 more established immigrants and one in four of people born in Canada.

This report by The Canadian Press was first published Nov. 8, 2024.

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Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

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The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.

The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.

CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.

This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.

While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.

Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.

The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.

This report by The Canadian Press was first published Nov. 7, 2024.

Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.

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Trump’s victory sparks concerns over ripple effect on Canadian economy

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As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.

Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.

A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.

More than 77 per cent of Canadian exports go to the U.S.

Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.

“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.

“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”

American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.

It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.

“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.

“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”

A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.

Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.

“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.

Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.

With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”

“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.

“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”

This report by The Canadian Press was first published Nov. 6, 2024.

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