Philippines: Q1 GDP contracted more than expected – UOB

Senior Economist at UOB Group Julia Goh and Economist Loke Siew Ting, review the recently published Q1 GDP figures in the Philippines.

Key Quotes

“Real GDP contraction halved to 4.2% y/y in 1Q21 from a decline of 8.3% y/y in 4Q20, but coming in worse than our estimate (-2.5%) and Bloomberg consensus (-3.2%). The continuation of government policy support, recovery in manufacturing production, accelerating digitalisation, and increased demand for healthcare services during the pandemic were main factors aiding the overall economic recovery last quarter.”

“Taking into consideration of the bigger-than-expected GDP decline in 1Q21 and re-imposition of stringent containment measures between late Mar and May this year, we slash our 2021 GDP growth forecast to 5.5% (from 7.0% previously). A wider, more effective vaccination rollout and expedition in government spending will be key impetus to sustain solid growth revival in 2H21 amid year-ago low base effects and improving external demand.”

“Despite 1Q21 GDP shrinking more than expected and Apr inflation holding steady at 4.5%, we expect BSP to stay put for the fourth meeting tomorrow as it is guarding against the second round of inflationary pressures. Hence, the overnight reverse repurchase rate is expected to be kept at 2.00%.”