Smaller contractions for Southeast Asia bolster hope for earlier recovery

11, Nov. 2020

People walking in the busy street of Quiapo Manila (Photo by Kristine Wook on Unsplash)
People walking in the busy street of Quiapo Manila (Photo by Kristine Wook on Unsplash)

By Celine Chen and Darlene Basingan

MANILA, NNA - Though still mired in a recession like most of the world, the Philippine economy managed to grow 8 percent in the third quarter after a 14.9 percent contraction in April-June pushed it into a deep trough.

On the flipside, Q3 GDP fell 11.5 percent from a year ago, the government reported on Tuesday.

The day before, the country's statistics agency reported that the economy had actually slumped by a record 16.9 percent in Q2, worse than its earlier estimate of 16.5 percent which had already sent the country into its first recession in decades.

But judging by the smaller quarter-on-quarter contraction in Q3, the government believes the worst is over for the Southeast Asian country where a gradual relaxation of coronavirus curbs has reopened more business activities.

“The economic team is optimistic that the worst is over for the country,” declared Acting Socioeconomic Planning Secretary Karl Chua, adding that the first sequential growth this year showed the economy was on the mend.

While noting that the worse-than-expected Q3 performance was due to the two-week return to stricter lockdown in bustling economic centers of Metro Manila and several neighboring provinces as well as the lack of public transport for workers, he is confident that the economy will have a “stronger bounce-back” in 2021.

Indeed there is optimism of a recovery sweeping across Southeast Asia as more countries are reporting a smaller quarter-on-quarter contraction in Q3 although they foresee a shaky path ahead.

The region is forging ahead with more collaborations to increase trade flows, digitalization alliances and efforts to tackle the coronavirus pandemic together in order to hasten recovery efforts.

News of COVID-19 vaccine developments added cheer to Asian stock markets on Tuesday. Apart from Pfizer's announcement of the effectiveness of its vaccine, Singapore said it will invest in the production of a vaccine expected to be available by early 2021

Supported by the manufacturing sector, Singapore's economy rebounded in the third quarter, rising by 7.9 after a 13.2 percent contraction in the second quarter when the city-state was mostly in a severe shutdown. After a gradual reopening in June, Singapore saw a steady recovery in economic activity.

Indonesia, which is Southeast Asia's largest economy, also rebounded 5.05 percent quarter-on-quarter in Q3. The government had also allowed more economic activities to resume after easing pandemic restrictions.

Malaysia, which is likely to announce Q3 figures on Friday, is expected to grow 11 percent quarter-on-quarter, according to a Bloomberg survey.

Vietnam’s GDP is poised to grow from 2.6 percent in Q3 to 4 percent in Q4, according to a forecast by United Overseas Bank.

Over in Thailand, Q3 showing has improved following the easing of lockdown measures in the kingdom and abroad, the central bank said recently, ahead of the official announcement of Q3 GDP data on Nov.16.

“Private consumption indicators bounced back close to the level in the same period last year after contracting severely in the previous quarter, together with the improvement in household income and consumer confidence,” it said in a statement in late-October.

In a virtual meeting on Tuesday evening (Nov. 10), economic ministers of Southeast Asian countries in the ASEAN grouping reaffirmed their commitment to facilitate trade flows and enhance economic integration to spur recovery.

They signed a Memorandum of Understanding (MOU) to refrain from implementing trade restrictive measures on selected essential goods, such as medicines and medical supplies to deal with the COVID-19 pandemic.

Singapore's Minister for Trade and Industry Chan Chun Sing said, “ASEAN’s efforts to deepen connectivity and digitalization will generate practical benefits for our businesses, which is particularly significant during this difficult time. The successful launch of these initiatives this year also reflect ASEAN’s determination to facilitate trade and strengthen supply chain connectivity within the region."

Meanwhile, the Philippines is witnessing quarter-on-quarter growth across all sectors after enduring severe second-quarter challenges. Only the agriculture sector managed to thrive year-on-year while industry and services remained in the red.

Secretary Karl Chua said the government’s continuous easing of restrictions for many industries, and the gradual reopening of transport services will be crucial for a better performance in the last quarter.

He said the government will no longer impose stricter measures to battle the pandemic, but will implement minimum health controls instead.

Nicholas Mapa, chief economist at the ING bank in Manila, expects the Philippine economy to contract by 10.8 percent this year with a 11.9 percent year-on-year decline in the last quarter.

For the first time, the country is expected to miss out on “the holiday surge that it usually enjoys in the last quarter,” he told NNA, adding that it might be a long road for the Philippines to enjoy past levels of 6 percent growth again.