* Q2 GDP shrinks 16.5% y/y, contracts 15.2% q/q
* Philippines suffers first recession in 29 years
* Government now sees 5.5% GDP fall this year
* Philippine economy snapshot: http://tmsnrt.rs/2nZqDWx
(Updates throughout, adds more comments, details)
By Enrico Dela Cruz and Neil Jerome Morales
MANILA, Aug 6 (Reuters) - The Philippine economy fell into
recession for the first time in 29 years with a record slump in
the second quarter, as strict lockdown measures ravaged economic
activity and prompted the government to sharply cut its GDP
forecast for 2020.
Official data showed on Thursday gross domestic product
PHGDP=ECI tumbling 16.5% in April-June from a year earlier -
the biggest slump since comparable GDP data was first recorded
in 1981 - after falling a revised 0.7% in the first quarter.
The drop was far bigger than the 9% contraction forecast in
a Reuters poll of economists and made the Philippines the second
country in Southeast Asia, after Singapore, to fall into
recession amid the coronavirus pandemic. Domestic demand and business investment were severely hit,
data from the Philippine Statistics Authority showed, while the
government was now forecasting the biggest annual drop in GDP
since 1985 this year. It reimposed restrictions in and around
Manila this week to fight a rise in coronavirus cases.
"The Philippine economy crash-landed into recession with the
Q2 GDP meltdown showcasing the destructive impact of lockdowns
on the consumption-dependent economy," said ING senior economist
Nicholas Antonio Mapa.
Seasonally adjusted GDP fell 15.2% in the second quarter
from the first three months of the year, while the government
sharply downgraded its 2020 growth forecast.
The Philippines was among Asia's fastest-growing economies
before the pandemic, but now the government expects its GDP to
shrink 5.5% this year - the biggest annual drop in 35 years -
from a previous forecast for a 2.0-3.4% decline. The government
sees the economy rebounding in 2021 and 2022.
The government has allocated some 655 billion pesos ($13.35
billion) to help people face the pandemic and 59 billion pesos
to improve the healthcare system, but this has done little to
ease the pain of a population facing record-high unemployment.
Jomar Santos, who used to earn 350 pesos ($7.14) a day
delivering school supplies to stores in Caloocan city, has been
at home since the lockdown resumed on Tuesday for the next two
weeks and worries about his wife and one-year old child.
"It's really very hard. No work, no food to eat," said the
23-year-old Jomar Santos.
"There's nothing we can do except to bear it. That's better
than me and my family getting sick."
The stock market .PSI largely shrugged off the data and
rose 1.2%, having already underperformed its regional peers this
year. The local currency PHP= closed slightly firmer at 49.05
to the dollar from Wednesday's 49.075.
WORSE OVER?
Pressure is mounting on the government to deliver more
far-reaching support, given the central bank has already cut
interest rates to record lows this year and that economists see
little room for more monetary easing as inflation rises.
"The worst is behind us, but we're not out of the woods
yet," Bangko Sentral ng Pilipinas Governor Benjamin Diokno said
on Thursday.
The central bank has slashed interest rates by a total of
175 basis points this year to a record low of 2.25%.
Michael Ricafort, economist at Rizal Commercial Banking Corp
said it is "fundamentally tougher to further cut local policy
rates at the moment" when inflation is at a six-month high of
2.7% in July, above the central bank's key interest rate.
Instead, policy support will have to come from further
reductions in banks' reserve requirement ratio, which would
inject liquidity into the market, or more government stimulus,
economists said.
($1 = 49.0510 Philippine pesos)