The Philippine economy contracted for the first time in more than two decades during the first quarter, but officials warned Thursday that the worst was likely yet to come as the nation reels from the coronavirus pandemic.
Gross domestic product shrank 0.2 percent in January-March, its worst performance since 1998 during the Asian financial crisis as the Philippines joins a long line of countries to report devastating figures as a result of widespread lockdowns that have shut down economies.
“Containing the spread of the virus and saving hundreds of thousands of lives, though the imposition of the (quarantine) has come at great cost to the Philippine economy,” Economic Planning Acting Secretary Karl Chua said.
The January eruption of the Taal volcano, which forced the temporary closure of Manila’s main international airport, also took a toll.
Chua said there would be more pain and the economy could further shrink in the second quarter.
“The first quarter, I think, is still respectable given the very difficult environment that we are in. The second quarter might be worse,” he said.
Growth in consumer spending, which is the Philippines’ key economic driver, slowed to just 0.2 percent during the period, hit by the closure of malls and shopping centres in areas under lockdown.
Many areas in the Philippines have been under quarantine since mid-March, and will remain so until at least mid-May, to contain the spread of the virus, including Manila and surrounding areas where most economic activity takes place.
“The current lockdown… will undoubtedly drag GDP deep into contraction as we see how destructive the enhanced community quarantine can be for the consumption-driven economy,” ING senior economist Nicholas Mapa said.
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But Chua added that the country could bounce back in the second half of the year as it gradually reopens businesses, adding: “With the progress that we are seeing on the health side, there is a very strong chance that we will have a good recovery.”
The Philippines has detected more than 10,000 coronavirus cases and more than 600 people have died.
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