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10% economic contraction in Q2 tolerable, says BSP chief

Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Thursday a gross domestic product contraction of 10 percent in the second quarter would be tolerable, but a deeper decline of more than 20 percent would create a lot of problems for the country.

Diokno made the comment in an online briefing ahead of the release of GDP figures next week.  

Diokno did not give any forecast for economic growth in the April to June period, saying it would be best for everyone to wait for the release of the important data next week.

“What I can say is that if it is a single-digit decline [in the second-quarter GDP], that is nice… But if that is higher than 20 percent, that is problematic,” Diokno said.

He said a second-quarter contraction of a little more than 10 percent would remain “tolerable.”

GDP contracted by 0.2 percent in the first quarter at the start of the pandemic and the Taal Volcano explosion. This was a reversal of the 5.7-percent growth a year ago and 6.4 percent expansion in the fourth quarter of 2019.

Economists expect the second-quarter contraction to be deeper because the lockdowns implemented by the government to contain the spread of the disease encompassed almost the entire period.

The US economy, the world’s largest, likely sank 35 percent in the second quarter, according to a poll by MarketWatch.

The interagency Development Budget Coordination Committee now expects the Philippine economy to contract 2 percent to 3.4 percent in 2020, before rebounding by 8 percent to 9 percent next year on expectation that the virus outbreak would be contained.

Diokno earlier said the country already experienced the worst of the COVID-19 pandemic and better GDP numbers could be expected beginning the third quarter.

“I foresee a ‘hockey stick-like’ recovery, with the lowest point in the second quarter. But the third quarter will be better and the fourth quarter will be even stronger. We expect a strong rebound in 2021 and 2022,” Diokno said.

“The worst is over. But while we’re not out of the woods yet, we have to look beyond this crisis. What else can we do to make the Philippines more robust and resilient? How do we prepare for the next

crisis? Let me remind you again that we entered this crisis from a position of strength,” Diokno said.

Topics: Bangko Sentral ng Pilipinas , BSP Governor Benjamin Diokno , gross domestic product , GDP , COVID-19 pandemic
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