Philippine Economy Continues To Contract

The Philippine economy continued to contract in the first quarter as the nation imposed strict restrictions to bring the coronavirus pandemic under control.

Gross domestic product fell 4.2 percent in the first quarter from the last year, the Philippine Statistics Authority reported Tuesday. This was slower than the 8.3 percent decline seen in the fourth quarter of 2020 but bigger than the 3 percent fall economists’ had forecast.

GDP has fallen for the fifth straight quarter and the latest drop was the slowest in four quarters.

On a quarterly basis, GDP grew only 0.3 percent, following a 5.6 percent surge in the fourth quarter.

The re-imposition of strict containment measures is likely to see output shrink this quarter, Alex Holmes, an economist at Capital Economics, said.

The weakness of the recovery is likely to prompt the central bank into cutting rates further to support the economy, the economist noted.

While elevated inflation will probably prevent the central bank from acting at its meeting this coming Thursday, it is still likely to cut later in the year if, inflation falls back within target, Holmes added.

On the expenditure side, household consumption shrank 4.8 percent annually, while government final consumption expenditure surged 16.1 percent in the first quarter.

Gross capital formation decreased sharply by 18.3 percent. Exports slid 9 percent and imports were down 8.3 percent.

The production-side breakdown showed that the decline was driven by a 24.2 percent plunge in construction. Services and industry contracted 4.4 percent and 4.7 percent, respectively. Farm output was down 1.2 percent.

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