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Dominguez sees economy picking up in 2nd quarter

FINANCE SECRETARY Carlos G. Dominguez III said he expects the country’s gross domestic product (GDP) to grow faster in the second quarter, as the number of coronavirus infections have dropped from April’s peak and more vaccines have arrived.

“There is good news on the horizon, however. In the second quarter of this year, we expect to begin growing our economy again. We see that the second wave of infections that started at the end of March has subsided dramatically. We hope that this will be the last surge,” Mr. Dominguez told a forum on Thursday.

If the upcoming batches of vaccines will arrive as scheduled, the Finance chief said the Philippines could see a “significant containment” of the outbreak next semester.

“We should have enough doses to vaccinate not only the 70 million adults in the country, but also some of the 15 million teenagers once the vaccine is approved by the Food and Drug Administration for them,” Mr. Dominguez said.

“We are also in the process of negotiating for the booster shots next year. The COVID-19 pandemic should soon be contained.”

The Health department reported 6,483 new COVID-19 cases as of May 27. This brought the number of active cases to 48,109, up from 46,037 reported on Wednesday.

UK-based think tank Capital Economics said the second quarter GDP could contract by 3% against the first quarter, as tighter lockdown restrictions remained in place in April.

If realized, this will reverse the 0.3% quarter-on-quarter increase in the first-quarter GDP.

“This quarter, tight containment measures have been introduced across much of the country in response to a surge in infections. While new cases have fallen back in recent weeks, they remain elevated and our mobility tracker is still around 35% lower than pre-pandemic levels,” Capital Economics said in a separate note on Thursday.

Capital Economics said they expect a 6% growth this year, which means the overall economic output will still be 1% lower than its pre-crisis level this year.

The estimate is at the lower-end of the government’s 6-7% growth target for the year.

The think tank said inflation will start easing in the second half on lower food prices and due to base effects.

“This should allow the central bank to cut interest rates by a further 50 bps (basis points) in the second half of the year,” it said.

Meanwhile, the prolonged lockdowns and delays in the delivery of vaccines will continue to dampen the Philippines’ economic recovery, according to a joint report by First Metro Investment Corp. (FMIC) and University of Asia and the Pacific (UA&P).

“The strong job numbers should help boost consumer spending, although the extended quarantine restrictions in Metro Manila plus could dampen it, and fractured supply chain may constrain stronger production gains,” FMIC and UA&P said in its May issue of “The Market Call.”

However, they said gains in job creation, increased state spending on infrastructure and rebound in exports will help boost the economy’s growth prospects.

Around 2.2 million more jobs have been created in March based on the official estimates by the Philippine Statistics Authority (PSA), after the unemployment rate went down to 7.1% from 8.9% a month earlier.

State spending on infrastructure grew 26.7% in the first quarter, providing “some confidence that this form of government recovery-employment-boosting spending has gained traction and should continue at a fast pace for the rest of the year,” FMIC and UA&P said.

Goods exports likewise jumped by 31.6% year on year in March, turning around from the 2.3% slump the month before. — Beatrice M. Laforga

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