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‘Sluggish’ vaccine rollout weighs on PHL recovery

The Health department said 2.86 million have been fully vaccinated in the Philippines as of July 4. —PHILIPPINE STAR/ MICHAEL VARCAS

By Luz Wendy T. Noble and Beatrice M. Laforga, Reporters

MOODY’S ANALYTICS downgraded its growth forecast for the Philippines this year, as a “sluggish” vaccine rollout may leave it vulnerable to a fresh wave of coronavirus disease 2019 (COVID-19) infections.

The research arm of Moody’s Investors Service now expects the country’s gross domestic product (GDP) to grow by 4.9% this year, a tad slower than the 5.3% estimate it gave in May. The latest forecast is also more pessimistic than the government’s 6-7% full-year target.

In an e-mail to BusinessWorld, Moody’s Analytics Senior APAC Economist Katrina Ell and Associate Economist Dave Chia said GDP growth this year has remained “relatively low” due to the quarantine restrictions in Manila and the slow national vaccination program.

“We are closely monitoring the performance of domestic demand and the COVID situation, and may adjust the GDP forecast if the outlook becomes more optimistic,” the economists said.

By 2022, they expect the Philippines’ GDP to grow by 7%.

In its latest note titled “Macro Roundup: COVID-19 Keeps Denting Southeast Asia’s Recovery” released on Monday, Moody’s Analytics said a faster vaccination drive will be crucial to support the Philippine economy as outlook is already improving amid lower COVID-19 infections and easing restrictions.

“Declining COVID-19 cases in the Philippines pave the way for its economic recovery as retail activities start to pick up. However, the country needs to step up its vaccination efforts, as the sluggish campaign leaves it vulnerable to fresh resurgences,” the report authored by Ms. Ell and Mr. Chia said.

Moody’s Analytics acknowledged that the situation in the Philippines has improved as cases declined from the peak of 11,000 new cases seen around late March to April.

The Health department reported 5,392 new COVID-19 cases on Monday, bringing the active cases to 51,594.

Based on Bloomberg’s vaccine tracker, it will take 21 months for the Philippines to cover 75% of its population at its average rate of 236,867 jabs per day. As of July 4, 2.86 million have been fully vaccinated in the Philippines, while 8.83 million have received their first vaccine dose.

The government aims to vaccinate 500,000 people daily in Metro Manila, Rizal, Bulacan, Cavite, Laguna, Metro Cebu and Metro Davao to achieve herd immunity in these high-risk areas by end-November. However, delays in the delivery of supplies will affect the rollout.

As restriction measures are gradually eased, analysts said some businesses will benefit but other industries will likely continue to see muted activities.

“Consumer-facing businesses such as food and beverage and broader hospitality services will continue to benefit with the government easing restrictions in Manila, as households are allowed to more freely access goods and services,” Ms. Ell and Mr. Chia said.

“However, hotel and service exports will continue to underperform and will be sluggish to recover as international arrivals remain well below pre-pandemic levels,” they added.

The economy shrank by 4.2% in the fourth quarter. Philippine GDP contracted by a record 9.6% in 2020.

Meanwhile, investment bank Nomura said the Philippines and Thailand will continue to lag behind Southeast Asian peers in economic recovery this year.

In a virtual media roundtable on Monday, Euben Paracuelles, Nomura’s chief economist for ASEAN, said the country’s economic output is only seen returning to pre-crisis levels by the third quarter of 2022.

Mr. Paracuelles said the Philippines is struggling to recover at a faster rate because of the slow pace of vaccination compared with its peers, as well as the lack of fiscal support from the government.

“If you look at the packages that has been passed by the government, it’s not really that comparable to the rest of the region where you see all kinds of packages being announced from wage subsidies to healthcare spending, and other types of support measures,” he said.

While the second stimulus package worth P205 billion under Bayanihan to Recover as One Act (Bayanihan II) was “not that impactful” to offset the fallout from fresh outbreaks and lockdowns, he noted that underspending still persisted and agencies were not able to fully utilize the funds before the law expired on June 30.

Data from the Budget department showed agencies were only able to spend P141.45 billion from Bayanihan II, five days before the law’s expiration, leaving P63.55 billion of unspent funds.

“Bayanihan II was not really that impactful when trying to provide some offset to the new pressures on growth. This now expires so there’s even less room for them to do more fiscal spending, which I think is really necessary. Other countries were able to provide more sizeable measures and a little bit faster,” Mr. Paracuelles said.

He said it remains uncertain if the government can still pass another stimulus package with Congress on recess until late-July.

The Philippines recorded $30.453 billion in monetary and fiscal stimulus measures so far, which was the fifth-highest coronavirus package among 11 Southeast Asian countries, data compiled by the Asian Development Bank (ADB) showed. The country’s package accounted for 8.62% of its economic output and translated to spending per capita of $281.67.

In April, Nomura slashed its growth forecast for the Philippines to 5.5% this year from 6.8% previously.

Mr. Paracuelles said infrastructure spending will have to provide the much-needed boost for the economy, especially ahead of the national elections in May 2022.

“That’s going to help the recovery somewhat, but what that also means it will increase importation and therefore the current account deficit will widen in the second half, which makes the country relatively vulnerable to capital outflow risks,” he warned.

Meanwhile, Mr. Paracuelles said they projected inflation to average at 3.9% by year’s end on expectations that the monthly print will start easing after two to three more months of breaching the central bank’s 2-4% target.

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