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Holiday spending, vaccine rollout seen producing ‘robust’ recovery

THE HOLIDAY spending surge and rising optimism associated with the vaccine rollout will support a “robust” economic recovery, according to First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) in a report released over the weekend.

In the December issue of its Market Call, FMIC and UA&P Capital Markets Research said it expects “a good economic recovery” next year as the economy reopens further and quarantine restrictions are relaxed, building on the momentum provided by holiday spending this month.

However, it warned that recovery “may not be fast enough for some” sectors.

“The further opening of the economy, the relaxation of lockdown restrictions due to the country’s winning stance against coronavirus disease 2019 (COVID-19) even without the expected rollout of vaccines and the usually ebullient Christmas season spending, provide the ingredients for a robust economic recovery,” it said.

The report cited the latest business expectations survey and consumer’s confidence index report of the Bangko Sentral ng Pilipinas (BSP) which showed firms and consumers becoming more optimistic this quarter, possibly carrying over intoh 2021.

The vaccine news has been positive lately, according to FMIC and UA&P Capital Markets Research, noting that in the Philippines, case rates are on a downtrend.

The Department of Finance (DoF), in an economic bulletin Sunday, said that “with a vaccine in sight, continuing the prudent, calibrated reopening of key sectors of the economy will be key to the recovery of the economy in general and trade in particular.”

The government should also proceed with its push to adopt policy reforms, boost infrastructure programs and attract more investments to further support recovery, it said.

FMIC and UA&P Capital Markets Research said the stronger-than-expected uptick in inflation to 3.3% in November is likely to be a one-off event caused by the destruction caused by the late-year typhoons and the resulting floods.

It maintained its inflation forecast for 2020 at 2.6% as “prices will revert to pre-typhoon days,” but expects the indicator to pick up to slightly higher levels next year.

This view of inflation is within the BSP’s inflation target of 2-4% for the year.

“Money growth continues to decelerate and this, together with inflation going back closer to 2% by January 2021, provides the BSP with more elbow room to cut policy rates by another 25 bps in Q1-2021 to provide a further boost to the domestic economy and lower borrowing costs of the national government,” it said. — Beatrice M. Laforga

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