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Economy

Philippines' GDP slump eases to 11.5% in Q3

Worse than expected performance makes annual target 'no longer feasible'

Filipinos queue for cash subsidies from the government amid the coronavirus disease outbreak, in Quezon City, Metro Manila in August.   © Reuters

MANILA -- The Philippine economy shrank 11.5% year-on-year in the third quarter, improving from a record contraction that plunged the Southeast Asian nation into its first recession in three decades.

The July-September gross domestic product figure, announced by the country's statistics agency on Tuesday, is worse than the 9.8% contraction projected by analysts polled by Reuters, but signals recovery from the prior quarter when the economic output shrank by 16.9%.

On a quarter-on-quarter basis, the economy grew 8%.

"The economic team is optimistic that the worst is over for the country," said Karl Chua, acting socio-economic planning secretary, during a news conference.

"The smaller GDP contraction ... indicates that the economy is on the mend. The path is clearer to a strong bounce-back in 2021," Chua added, reading a prepared joint statement by President Rodrigo Duterte's economic team.

The third-quarter data put the nine-month contraction at 10%, National Statistician Dennis Mapa said, thwarting hopes for a 5.5% full-year contraction that economic officials projected in August. "At this point that is no longer feasible," Mapa said during the online briefing.

Community quarantine restrictions in the country were loosened in June, paving the way for the reopening of more businesses and increasing the capacity of public transportation.

But the government in August imposed a two-week stricter lockdown in Metropolitan Manila and nearby provinces after doctors warned the health care system was being overwhelmed, derailing a stronger rebound.

Major industries suffered big declines. Services dropped 10.6% in the third quarter, while the industry sector fell 17.2%. Agriculture grew by 1.2%.

Meanwhile, household consumption fell 9.3% amid a rise in unemployment, while government spending rose 5.8%.

Nicholas Antonio Mapa, a senior economist at ING Bank Manila, expects a "base effect-induced" rebound to start in the second quarter of next year.

"Household consumption, which delivers the bulk of economic activity, will be handicapped in months ahead given the challenging labor market while bank lending slowed to single-digit growth, signaling a parallel slowdown in investment momentum," Mapa said. "We also highlight the sustained elevated number of COVID-19 daily infections, which may increase in the coming months with authorities planning to relax lockdown measures further."

The Philippines has suffered from one of the region's worst COVID outbreaks, with over 398,000 infections, of which 29,000 are active, and 7,647 fatalities as of Nov. 9.

Recent strong typhoons, which destroyed billions of pesos worth of infrastructure and crops, "would have an impact" on fourth-quarter GDP, Acting Secretary Chua said.

Ella Hermonio contributed to this report.

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