Sun Life sees GDP shrinking by 6.5% in 2020

MANILA, Philippines — Insurance giant Sun Life of Canada (Philippines) Inc. expects the country’s economy to contract by 6.5 percent this 2020, before following a U-shaped recovery by next year.

In a webinar conducted by the company yesterday, Sun Life chief market development officer Michael Manuel said the company sees a 6.5 percent decline in gross domestic product (GDP) this year, worse than the two to 2.5 percent contraction it projected back in May.

This is also higher than the Development Budget Coordination Committee’s (DBCC) forecast of 5.5 percent, as well as the market consensus of 6.1 percent.

Nevertheless, Manuel said Sun Life still expects the economy to follow a U-shaped recovery, different from the market’s consensus of a swoosh-shaped economic rebound.

“In 2021, we are probably seeing the first signs of positive economic growth as the government tries to go on a Build Build Build load. So if you look at 2021 economic forecast numbers, they are on the positive side and likely to come in anywhere between five to six percent growth.”

He said an economic recovery would most likely lead to improvements in company earnings, and therefore drive a stock market rebound.

According to Manuel, there are already various signs that the economy is recovering.

He said the country’s exports in June and July, while still lower year-on-year, were better than the April numbers, during the height of the enhanced community quarantine in Luzon.

“Import numbers have also bounced back significantly, and imports are a good leading indicator of economic direction, particularly because the Philippines is an import dependent country. We typically need to import oil, cement and steel to actually fuel the growth of our economy and a rise in imports is certainly a welcome development that probably gives us a good idea that there is an economic recovery brewing,” he said.

The Sun Life official also noted improvements in overseas Filipino workers’ (OFW) remittances, which bodes well for the economy as it fuels consumption.

Manuel said manufacturing purchasing managers’ index (PMI) is also recovering, albeit still below 50.

“Unemployment numbers peaked in April of 2020. Our unemployment rate reached about 17 percent from five percent in January. Our unemployed numbers topped more than 7 million in April. But since then, as the economy opened up, the unemployment rate numbers have gone down to 10 percent. And the unemployed number is down about to 4.6 million,” he said.

He said Sun Life, itself, saw a bounce back in its sales, coming from 135 units in April to about 22,000 units sold in July.

“So certainly some green shoots are emerging and we are looking at those developments as a possible signal to all of us that an economic recovery might be taking shape,” he said.