Will exports and commodity prices offset Q3 2021 GDP contraction?

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Exports and Commodity Prices Expected to Mitigate Q3 2021 GDP Contraction

Exports and firm commodity prices are anticipated to mitigate the extent of the Gross Domestic Product (GDP) contraction in the third quarter of 2021. While the economy is projected to experience a significant downturn during this period, the impact on overall performance is expected to be cushioned by these external factors. The Industrial Production Index (IPI) also saw a continued downtrend in August 2021, though this contraction was less severe than in July, which was largely within expectations due to prolonged lockdown measures.
Q3 GDP Contraction Expected to Be Less Severe Than Initially Feared

The economy is forecast to take a substantial hit in the third quarter of 2021, with AmBank Research projecting a negative growth of 2.0 to 3.0 per cent for this period. This prediction is based on preliminary estimates, acknowledging the ongoing challenges posed by extended lockdowns aimed at containing the Covid-19 pandemic, which have continued to dampen business, investment, and consumer confidence.
August GDP Growth Shows Improvement from July Estimates

In August 2021, the Gross Domestic Product (GDP) growth was estimated to be around -4.0 per cent, representing an improvement from the -8.4 per cent contraction estimated for July. This suggests a slight moderation in the economic downturn, even as restrictions remained in place.
Q4 GDP Anticipated to Recover Due to Easing Restrictions and High Vaccination Rates

The fourth quarter of 2021 is expected to see an improvement in GDP growth. This anticipated rebound is attributed to the easing of movement restrictions, a high vaccination rate among the adult population (exceeding 90 per cent fully vaccinated), and increased domestic stability. Furthermore, favourable global trade conditions and firm commodity prices are also expected to lend support to economic recovery.
Full-Year GDP Forecast Remains Positive

For the entirety of 2021, the GDP is forecast to achieve a growth of around 3.0 to 3.5 per cent. This positive outlook for the full year is contingent on the projected recovery in the final quarter, despite the expected contraction in the third quarter. The resilience of exports and commodity prices will play a crucial role in achieving this annual growth target.

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Will exports and commodity prices offset Q3 2021 GDP contraction?

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