As the full extent of the dreaded coronavirus disease 2019’s (COVID-19) impact on the economy remains uncertain, the highest monetary authority in the land said local output, measured in gross domestic product (GDP) could manifest a U-shaped recovery.
“The reasonable expectation is for the second quarter figures to be much worse than the first, that’s elementary. The impact of COVID-19 is broader than the early assessment and this suggests that we are looking at a U-shape recovery,” Bangko Sentral ng Pilipinas Governor Benjamin Diokno said during a virtual briefing.
Such a recovery takes longer than the other version called a V-shape recovery.
“COVID-19 is different from prior crises because it is a direct shock to the real economy, to supply chains and to the welfare of families and individuals,” he added.
Nevertheless, the BSP chief said that based on their reading of current economic indicators, there is no sign that the financial market has been affected to the extent of it being beyond repair.
“We fully recognize the challenges that are out there today but we also cannot stay idle and allow the economy to collapse. The prudent approach is a calibrated opening up of the economy,” he explained.
Still, Philippine Deposit Insurance Corp. (PDIC) president and CEO Roberto Tan said that the financial system needs ample liquidity to enable economic recovery.
Informed decisions a must
“There should be enough liquidity in the system to meet uncertainties that may be priced into market yields. Stakeholders (must also be kept) updated so that everyone can make well informed decisions,” Tan explained.
GDP for the first quarter 2020 contracted by 0.2 percent, effectively placing the economy to enter a recession with a deeper plunge to the negative territory eyed for the second quarter.
Department of Finance Secretary Carlos Dominguez III earlier said consumption is expected to pick up in the coming months to support economic recovery in the process as it dictates about two-thirds of the country’s total GDP number.