THE Philippines may continue to see a lackluster economic recovery, returning only to pre-pandemic gross domestic product (GDP) level by the fourth quarter of 2022, ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said on Monday.
In a briefing on Monday, Mr. Mapa said the central bank is likely to provide continued support for the economy by being accommodative and avoiding any further policy actions this year, before going for a 50-basis-point rate cut in 2022.
This year, he said the economy may grow by 5.1% but mainly due to base effects from the 9.5% contraction in 2020. This is a less optimistic forecast than the 6.5% to 7.5% growth outlook by economic managers.
“COVID-19 wiped out three years of economic gains and now we’re sort of operating at that base. The real question will be: What will be the growth trajectory after 2021 when the base effects have been washed out?” Mr. Mapa said.
With the job market still “not looking rosy,” consumption, which fuels 70% of the economy, is unlikely to see hefty recovery. Mr. Mapa said it will be “difficult to expect a strong bounce back” when unemployment remains high.
The jobless rate in October stood at 8.7% representing about 3.813 million unemployed Filipinos.
In terms of capital formation, the decline in bank lending suggests investments may likely to bounce back soon, Mr. Mapa said.
For the first time in over 14 years, outstanding loans by banks declined 0.8% in December following the already tepid 0.5% in December.
“Even though the BSP has cut the borrowing cost, [rates] have not really followed suit in 2020. This has been tied to banks being a little more circumspect in giving out loans as there’s a lot of risks out there,” he said, noting bank lending may remain tepid in the next couple of months.
However, Mr. Mapa said government spending could be a saving grace, but fiscal measures, including the P4.5-trillion national budget, have been modest.
“Yes, it’s the biggest budget in history, however, maybe not commensurate to the drop in GDP,” he said.
On the monetary side, Mr. Mapa is pricing in a pause for the rest of 2021 before the central bank likely goes for a 50-bps rate hike next year.
“This pause allows them to provide stimulus given the low rates but sort of at the same time achieving their inflation targeting price stability mandate,” Mr. Mapa said.
The central bank maintained the key policy rate at a record low of 2% last week.
Meanwhile, the Philippine economy is expected to post the second-highest growth in Southeast Asia this year, data and analytics company GlobalData said.
In a statement, GlobalData said Philippine GDP is projected to grow by 8.4% this year, after a 9.5% GDP contraction in 2020.
This would be the second-fastest GDP growth among nine ASEAN countries tracked this year.
Sought for further details, GlobalData did not respond to queries as of press time.
GlobalData expects the broader Association of Southeast Asian Nations (ASEAN) region to grow by 6% this year, as the coronavirus infections taper off and international trade picks up.
Fatality rate due to COVID-19 in Indonesia and the Philippines have fallen to 2.7% and 2.1%, respectively as of February. Meanwhile, the death rate in Malaysia, Thailand and Singapore are near zero percent.
“Due to the implementation of non-tariff measures on essential goods among the ASEAN nations, trade is expected to increase in 2021. Trade windows are set to open for ASEAN nations with the signing of Regional Comprehensive Economic Cooperation (RCEP) in November 2020, which will further spur economic integration,” Gargi Rao, an economic research analyst at GlobalData was quoted as saying.
Ms. Rao expects a “sharp recovery” happening in the second half.
Aside from improving the trade environment, she said the region’s manufacturing sector will also bounce back this year given a stronger health sector, the global vaccine rollout and a steady recovery in demand and production.
In the Philippines, factory activity surged to a two-year high in January with a Manufacturing Purchasing Managers’ Index (PMI) of 52.5.
Vietnam is still poised to lead the economic growth this year, according to GlobalData with a projected 8.5% expansion in 2021 from a 1.7% estimated uptick last year.
“GlobalData forecasts Vietnam to be the fastest-growing economy with a real GDP growth of 8.5% in 2021. Vietnam’s growing trade with the EU and its robust fiscal policies have helped the economy to witness an uptick in manufacturing and service sectors growth,” the statement read.
For the rest of the region, Malaysia is estimated to grow by 7.1% this year, Cambodia by 6.7%, Singapore by 5.8%, Myanmar by 5.4%, Indonesia by 5.2%, Thailand by 4.4% and Brunei by 2.5%.
“Increasing investment and recognizing open trade are key to put ASEAN economies on a steady growth path, along with effective vaccination for COVID-19 in 2021. An uptick in retail trade and growing demand for e-commerce will bring in new capital to spur growth,” Ms. Rao said. — Luz Wendy T. Noble and Beatrice M. Laforga