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BSP sees GDP contraction in Q2 less severe

The central bank said yesterday that while the gross domestic product (GDP) number is expected to slip in the second quarter, it will however contract “at a slower pace” for the last two quarters of 2020.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno, as per the BSP Department of Economic Research, said: “For the rest of year, output is expected to decline at a slower pace as firms and households gradually adjust to post-pandemic conditions. GDP growth is expected to recover in 2021 as government policy support measures fully gain traction.”

The BSP released this statement as part of its commentary on the July inflation turnout out of 2.7 percent, and while more than June’s 2.5 percent, was within the BSP’s 2.2 percent to three percent forecast for July.

Diokno has said that the “worst is over” after the second quarter and that the “contraction in domestic economic activity is seen to have bottomed out in the second quarter.” The impact of the COVID-19 health crisis will be bigger in the second quarter after a 0.2 percent contraction in the first three months.

The BSP’s Monetary Board will have the two important indicators – inflation and the GDP number – to review when they have their monetary policy meeting on August 20. The second quarter GDP report will be released tomorrow, Thursday.

 “(We will) consider the latest inflation outlook along with the release of the second quarter GDP at the upcoming monetary policy meeting on August 20. The BSP remains ready to deploy all available measures in its toolkit in fulfillment of its policy mandate as it continues to assess the impact of the global health crisis on the domestic economy,” according to Diokno.

Both Diokno and the DER also continue to note that inflation numbers remain consistent with the BSP’s “prevailing assessment that inflation is expected to remain benign over the policy horizon due largely to the potential adverse impact of COVID-19 on the domestic and global economic prospects.”

The central bank has a 2.3 percent inflation forecast for 2020 and 2.6 percent for 2021. The benign outlook is one of the key reasons why the Monetary Board cut interest rates by a cumulative 175 basis points as of June this year, in a aid of economic recovery.

Source: Manila Bulletin (

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