Economist sees ‘slightly better’ GDP growth in Q3

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Metro Manila (CNN Philippines, June 11) – The country will experience ‘slightly better’ gross domestic product growth in the third quarter of this year amid slow economic progress at present due to the COVID-19 pandemic, a Singapore-based economist suggested.

Euben Paracuelles, chief ASEAN economist of Japanese investment bank Nomura, noted the relaxation of lockdown measures and gradual reopening of businesses will help the country bounce back from its economic losses brought by the COVID-19 pandemic.

“The question is how sustainable the recovery will be? It will ultimately depend on how fast the government can put control on the local COVID-19 outbreak,” Paracuelles told CNN Philippines’ Rico Hizon on Wedensday night.

Paracuelles added the country will definitely hit recession in the second quarter, as it grapples with movement restrictions and suspension of businesses operations caused by the pandemic.

READ: World Bank pegs PH recession at 1.9% this year, poverty to rise due to pandemic

But the Singapore-based economist said the economic stimulus bills should be prioritized by the two legislative chambers in the country to address immediate and long overdue assistance to affected workers and businesses, who lost significant income during the quarantine period.

“I would argue that these bills are urgently needed. A lot of people lost their jobs, whether temporary or permanent. Companies, in particular MSMEs, need a lot of assistance. These people need a lot of help,” said Paracuelles.

The House of Representatives passed on final reading the ₱1.5-trillion COVID-19 Unemployment Reduction Economic Stimulus (CURES) Act of 2020, ₱1.3-trillion economic stimulus package entitled Accelerated Recovery and Investments Stimulus for the Economy (ARISE) Act, and the Financial Institutions Strategic Transfer (FIST) Act.

The Senate has yet to tackle the three bills. Both chambers of Congress need to approve the bills before they are reviewed and signed into law by the President.

While the Department of Finance rolled out a separate ₱1.74 trillion four-pillar response, including over ₱200 billion to be released as cash subsidies to workers displaced by the enhanced community quarantine in the country.

Paracuelles lauded the Bangko Sentral ng Pilipinas for cutting interest rates early, saying this monetary policy is the easiest and quickest to implement in reigniting the country’s economy amid the economic crisis caused by the pandemic.

READ: Central bank cuts interest rates to record low as COVID-19 drags economy

“The Central Bank has really been active in providing relief measures and credit access. By end of June, I’m expecting Central Bank to cut rates further,” he said.

As problems arise whether the current ₱8.47 trillion government debt can hinder the country’s economic recovery amid the pandemic, Paracuelles eased worries on the figure but stressed there should be sustainable economic programs in improving the country's ability to repay the debt over medium term.

“The total debt level is still relatively low, around 40 percent. If you compare with other countries, that’s favorable. The recovery has to happen first and has to be sustained,” said Paracuelles.

The Nomura bank economist pegged the country’s economic growth at negative 4.8 percent this year due to the pandemic, but will rebound to 8.1 percent next year under certain conditions.

“The condition is the virus is put under control as soon as possible and fiscal authorities provide bigger fiscal support,” he noted.