• Philippines’ GDP growth in 4Q20 declined for the fourth consecutive quarter by 8.3% yoy from -11.4% in 3Q20.
• Philippines’ export growth fell by 0.2% yoy in December from an increase of 4% in November, mainly weighed down by the decline in exports of agro products.
• Thailand industrial production fell by 2.4% yoy in December from a positive growth of 0.2% in November.

Risks to Philippines’ trade performance still tilted towards the downside

Philippines’ GDP growth in 4Q20 declined for the fourth consecutive quarter by 8.3% yoy from -11.4% in 3Q20. Despite the sustained contraction, the pace of decline has continually improved from its low of -16.9% in 2Q20. For the full year, GDP growth fell by 9.3% yoy in 2020 compared to an expansion of 6% in 2019. Growth during the quarter was supported by slower decline in private consumption of -7.2% (-9.2% in 3Q20) while total investment eased to -28.6% (-37.1% in 3Q20). Meanwhile on the supply side, growth was underpinned by a slower contraction in the industry sector of -9.9% (-17.3% in 3Q20) and service sector of -8.4% (-10.5% in 3Q20). Going forward in the near term, we anticipate recovery to be hampered by the ongoing partial lockdown in Metro Manila and seven other areas until January 31 as the number of cases remain elevated. In terms of trade, Philippines’ export growth fell by 0.2% yoy in December from an increase of 4% in November, mainly weighed down by the decline in exports of agro products. Meanwhile, import growth declined by 9.1% yoy in December from -18.3% in November. As a result, trade deficit widened to US$2.2bn from US$1.7bn in November, its widest deficit since March 2020. As other countries have also reinstated restriction measures, risks to Philippines’ trade performance will continue to be tilted towards to the downside in the in the coming months. Nevertheless, the country’s vaccination program which is anticipated to begin in February will bode well the domestic economic growth as restriction measures are anticipated to ease as a result. In addition, the ongoing accommodative monetary policy as well as fiscal policy measures will also be supportive of the country’s economic recovery.

Separately, in Thailand factory output fell by 2.4% yoy in December from a positive growth of 0.2% in November. Lower production in December was mainly due to a further fall in production of food products, wearing apparel, leather and related products, coke and refined petroleum products, rubber and plastic products, machinery and equipment as well as other transport equipment. In 2020, output contracted for the second straight year by 8.8% yoy from -3.6% in 2019. The Office of Industrial Economics (OIE) guided that it anticipates production to rebound in January supported by the government’s swift response to containing the outbreak as well as anticipation of an improvement in exports. Moreover, the OIE is also projecting manufacturing production in 2021 to grow by 4%-5% (-8.8% in 2020). We believe that the recent rise in cases may pose as a headwind especially if lockdown measures are tightened as a result. The vaccine rollout in Thailand is expected to begin in February but as there is limited availability according to the Public Health Ministry, the administration of vaccines could be delayed.

Source: Affin Hwang Research - 29 Jan 2021