Connect with us

Hi, what are you looking for?

Economy

Slower PHL growth seen amid prolonged pandemic

By Beatrice M. Laforga, Reporter

THE ASEAN+3 Macroeconomic Research Office (AMRO) tempered its economic growth forecast for the Philippines this year due to a resurgence in coronavirus disease 2019 (COVID-19) infections coupled with a sluggish vaccine rollout, highlighting the need for the government to boost fiscal support to minimize economic scarring.

The regional macroeconomic surveillance organization slashed its 2021 gross domestic product (GDP) forecast for the Philippines to 6.4% from the 6.9% estimate it gave in March, based on its latest Annual Consultation Report published on Tuesday.

This was still well within the government’s 6-7% growth target for the year and a turnaround from the record 9.6% GDP contraction in 2020.

AMRO economist Zhiwen Jiao said the further reopening of the economy, recovery in business and consumer confidence, and a faster vaccination program will support the baseline forecast for this year.

“This new wave of infections (in March) has significantly raised downside risk to both our output and baseline forecasts. For the recovery to catch up, mass vaccination becomes more urgent. So far, the vaccination rollout in the Philippines has remained relatively slow,” Mr. Jiao said at a briefing on Tuesday.

On a worst-case scenario, AMRO Chief Economist Hoe Ee Khor said another wave of COVID-19 infections and the reimposition of stricter lockdowns could hamper recovery, and bring Philippine GDP growth to 5.5% or even 4.5% this year.

The Health department reported 4,479 COVID-19 infections on Tuesday, bringing active cases to 50,037. However, experts have warned of a potential surge in infections because of the more contagious Delta variant from India.

As of June 27, the government has given out more than 10 million doses, 7.5 million of which were first doses.

The Philippines aims to inoculate at least 500,000 people daily in Metro Manila, Rizal, Bulacan, Cavite, Laguna, Metro Cebu and Metro Davao to achieve herd immunity by Nov. 27.

‘PERMANENT SCAR’
For 2022, AMRO also lowered its growth forecast to 6.8%, from an earlier projection of 7.8%. This falls below the 7-9% GDP growth target of the government.

Output gap, or the difference between the actual GDP and its potential output, will likely remain negative at least until the end of 2022, AMRO said, citing expectations that a weak recovery and prolonged sluggish activity might leave a “permanent scar” on the economy.

Private consumption will likely pick up by 5.3% this year from last year’s 7.9% contraction, before rebounding again by 5.8% in 2022.

Government spending, however, is seen slowing down to 8.7% from the 10.5% spike last year, before rising by 12.5% next year.

AMRO warned that muted state spending amid the crisis could only further derail the economy’s recovery.

“While expansionary fiscal policy in 2021 will continue to support economic recovery, the recovery is still nascent, and further fiscal support would be critical if the growth momentum proves weaker-than-expected and the economy falters,” AMRO said.

Faced with the risk of economic scarring lowering potential growth, AMRO Senior Economist Byunghoon Nam said the Philippine government still has ample fiscal space to expand its support to the economy.

Mr. Nam said higher fiscal spending will raise the country’s debt level relative to GDP in the next two to three years, but the ratio will start to ease over the longer term when faster economic growth boosts government revenues and the capacity to pay off its debts.

“In the short term, more growth-friendly and supportive fiscal programs will promote stronger economic recovery. A more expansionary fiscal policy can recover the potential growth path, faster than the current fiscal policy,” he said.

“We recommend that the Philippine government should leverage on a sufficient fiscal policy space to achieve robust recovery and a more sustainable growth,” he added.

AMRO expects the budget deficit to widen to 9.5% of GDP by year’s end, slightly higher than the limit set by the government’s economic managers at 9.3% but wider than the 7.6% ratio seen last year.

Monetary policy will remain accommodative until next year amid the relatively benign inflation outlook. AMRO said the Bangko Sentral ng Pilipinas (BSP) deployed its monetary and regulatory policy responses swiftly and effectively to ensure ample liquidity in the market, but it has been “less successful in stimulating credit growth.”

“To better support the recovery, more efforts should be placed on enhancing the effectiveness of monetary transmission and supporting credit expansion,” it said.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Get the daily email that makes reading the news actually enjoyable. Stay informed and entertained, for free.
Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

Latest

Investing

People living in rural areas are having to travel further to find somewhere to withdraw and deposit cash free of charge, says the City...

Investing

Ministers have ruled out extending the list of workers who are exempt from self-isolation rules and warned that the August 16 date for lifting...

Economy

The House of Representatives will adopt the Senate’s version of the proposed measure taxing Philippine Offshore Gaming Operators (POGO), a key lawmaker said on...

Economy

President Rodrigo R. Duterte on Friday approved the recommendation of his pandemic task force to enforce stricter quarantine rules in Manila, the capital, and...

Economy

Thirty-seven percent of Filipinos are optimistic that their lives will improve over the next 12 months, a non-commissioned survey shows.  Of the 1,200 respondents in Social Weather Stations’...

Economy

Six electricity consumers on Friday filed a complaint with the Ombudsman against Department of Energy (DoE) Secretary Alfonso G. Cusi, alleging that the government official has neglected his duties.  “In his five...

You May Also Like

Investing

Having a good Instagram marketing agency to back up your Instagram account is an absolute must going into the new year. With competition stronger...

Economy

US President Joseph R. Biden, Jr., will rely on ally countries to supply the bulk of the metals needed to build electric vehicles and focus on...

Investing

As a traditionally rigid insurance industry becomes bogged down by antiquated processes and operations, a handful of industry leaders are seeking to shake things...

Economy

THE Securities and Exchange Commission (SEC) has warned the public from investing or to stop any investment in a group named Maxxprofit Computer Trading...

Disclaimer: SmartRetirementReport.com, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2021 SmartRetirementReport. All Rights Reserved.

Get the daily email that makes reading the news actually enjoyable. Stay informed and entertained, for free.



Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!