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PHL rebound from low base seen outpacing regional peers

THE ECONOMY’S rebound in 2021 is expected to be larger than those of its regional peers because it will be coming off a low base in 2020 due to the prolonged lockdown, Oxford Economics said.

In a note released Wednesday, Oxford Economics said Vietnam and the Philippines will grow faster than the rest of a peer group it calls the ASEAN-6, whose other members are Indonesia, Malaysia, Singapore and Thailand.

“We expect a solid rebound in growth this year across the region. Vietnam and the Philippines are set to outpace the rest, although in the case of the Philippines this reflects low base effects after last year’s sharp contraction,” it said.

Oxford Economics expects the Philippine economy to rebound by 7.7% this year after an estimated 10% slump in 2020, the deepest contraction of gross domestic product (GDP) in the region.

“Thailand and the Philippines have lagged. Travel restrictions have weighed on the recovery in Thailand, despite its earlier success in controlling infections, while prolonged lockdowns have weighed on activity in the Philippines,” it said.

Quarantine restrictions in the Philippines have been eased to a more relaxed form in late 2020 but travel is still limited and subject to health protocols.

The Philippine Statistics Authority will report on Thursday official GDP data for the fourth quarter and for 2020.

A BusinessWorld poll last week yielded a median estimate of a GDP contraction of 8.5% for the fourth quarter and a 9.5% contraction in 2020.

The economy shrank by 10% in the first nine months of 2020, declining by 0.7%, 16.9%, and 11.4% in the first to third quarters, respectively.

Leading the region’s recovery, Oxford Economics projected Vietnam’s economy to grow 7.7% this year after it posted an estimated 2% gain in 2020, owing to the country’s successful containment of its coronavirus disease 2019 (COVID-19) outbreak.

“Vietnam has been a clear winner, as its successful containment of infections has led to faster normalization in activity, with GDP already back above pre-COVID-19 levels,” it said.

It expects both Singapore and Malaysia to expand by 5% this year, followed by Indonesia with 4.7% growth and Thailand with 4.3%.

The regional GDP growth average for the ASEAN-6 is projected at 5.3% in 2021.

“An upside scenario based on faster vaccine rollout could see ASEAN-6 average GDP increase by nearly 10% in 2021. But in a scenario with slower vaccine rollout and a surge of infections, the regional recovery will be delayed to 2022,” Oxford Economics said.

Mobility restrictions are expected to be further relaxed over the next two months, especially for the worst-hit countries, to support their economic recovery.

The extent of the rebound, however, relies on the swift rollout of vaccination programs, with Singapore expected to be the first among the six to reach herd immunity, with 87% of its population set to be vaccinated by the end of 2021.

Oxford Economics said the Philippines is expected to have vaccinated 35% of its population by the end of the year, while the mass immunization program in Indonesia may take 12-15 months to cover two-thirds of its population.

“The start of vaccinations should buoy consumer and business confidence across the region, spurring an improvement in service sector activity, including ‘social spending’ and domestic tourism. But we expect tourism-related sectors to be the last to recover as border controls remain in place,” it said.

Recovery in global trade will also contribute to a stronger rebound for the region, with the manufacturing sector in the Philippines only seen picking up when lockdowns are eased further.

“We expect macroeconomic policies to remain supportive of the recovery and we do not look for any sharp unwinding in support this year,” it said.

“Despite our strong growth projections for this year, we believe that a return to the pre-pandemic ‘trend growth’ will take longer. We also think there will be some lasting economic scars due to the pandemic, including a slow labor market recovery with the risk of some permanent job losses and lower capital accumulation,” it added. — Beatrice M. Laforga

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