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Philippine recovery underway, observers say

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The skyline of Makati Business District in the Metro Manila region’s Makati city. PHILIPPINE DAILY INQUIRER

Philippine recovery underway, observers say

The Philippine economy likely grew by above five per cent in 2021, signifying a rebound starting last year after it suffered from its worst post-war recession due to the most stringent lockdowns that shed millions of jobs and shuttered thousands of business in 2020.

Of the 23 forecasts collected by the Inquirer from economists and think tanks, 20 projected gross domestic product (GDP) or the total goods and services produced in the country last year to have grown by at least five per cent, which is at the low end of the government’s 2021 target.

The highest full-year growth forecast of 5.7 per cent, estimated by Ateneo de Manila University’s Ser Percival Pena-Reyes, was even higher than the top end of the government’s five-to-5.5 per cent target range.

The government will report on the fourth-quarter and full-year 2021 GDP performance on January 27. Before 2020 ended, President Rodrigo Duterte’s economic managers targeted 6.5 to 7.5 per cent growth in 2021 on the back of expectations of immediate vaccine rollout and low-base effects from the record 9.6-per cent GDP contraction that year.

But elevated Covid-19 infections, including the Delta wave during the third quarter of 2021, which prolonged strict quarantine restrictions, left the economic team with no choice but to slash their 2021 growth outlook to as low as four-to-five per cent.

By December 2021, further reopening of the economy in line with a government mindset that Covid-19 was endemic allowed more productive sectors to increase output and offer more but temporary jobs during the fourth quarter made the economic managers more optimistic, hence the current five-to-5.5 per cent full-year GDP growth goal.

The highest fourth-quarter GDP growth forecast of 7.8 per cent year-on-year also came from Pena-Reyes, who pointed to “increased economic activity and lower Covid-19 numbers in the fourth quarter of 2021 against the third quarter”.

Capital Economics’ Alex Holmes projected 7.3-per cent year-on-year growth during the fourth quarter of last year; Regina Capital’s Luis Limlingan, 7.2 per cent; and IHS Markit’s Rajiv Biswas, 7.1 per cent.

The majority of the economists forecasted fourth-quarter growth to have slowed compared with the stronger-than-expected 7.1 per cent year-on-year expansion in the third quarter.

These are Rizal Commercial Banking Corp’s Michael Ricafort and United Overseas Bank’s Loke Siew Ting (seven per cent); ING’s Nicholas Antonio Mapa and Pantheon Macroeconomics’ Miguel Chanco (6.7 per cent); and Sun Life Financial’s Patrick Ella (6.6 per cent).

Offering lower figures still were Bank of the Philippine Islands’ Emilio Neri Jr and Standard Chartered’s Jonathan Koh (6.5 per cent); Goldman Sachs Economics Research (6.4 per cent); and Philippine National Bank’s Alvin Arogo (six per cent).

“The fourth-quarter data prints would imply that our full-year 2021 real GDP growth forecast increases to 5.3 per cent from 5.1 per cent previously and 2022 real GDP growth forecast mechanically increases to 7.7 per cent from 7.1 per cent previously,” investment banking giant Goldman Sachs said in a report.

Security Bank’s Robert Dan Roces projected fourth-quarter 2021 GDP growth at 5.8 per cent year-on-year; ANZ’s Sanjay Mathur, 5.3 per cent; Spencer, DBS’ Han Teng Chua, and UnionBank’s Ruben Carlo Asuncion, 5.2 per cent; Moody’s Analytics’ Sonia Zhu, 5.1 per cent; BDO Unibank’s Jonathan Ravelas, five per cent; HSBC Global Research, 4.9 per cent; University of Asia and the Pacific’s Victor Abola, 4.1 per cent; and Oxford Economics’ Makoto Tsuchiya, 3.9 per cent.

For Tsuchiya, “high underemployment rate and only modest growth in remittances likely put a lid on private consumption growth; at the same time, weaker demand from China and other major trading partners resulted in slower growth in goods exports” during the final quarter of 2021.

Economists also expect a bigger fourth-quarter GDP compared to third-quarter output, with estimates ranging from 0.7-to-four-per cent quarter-on-quarter growth.

However, last year’s revert to economic growth still presented challenges before returning to pre-pandemic potential. Deutsche Bank’s Michael Spencer noted that “recovery in the Philippines is expected to be a gradual process and medium-term growth is likely to be slightly slower” than how fast it should have grown if Covid-19 did not happen.

Spencer estimated the about 16-per cent gap in current real GDP and the Philippines’ pre-pandemic trajectory was “unlikely to close” even until 2023. For this year, the majority of economists fear the government’s ambitious seven-to-nine per cent growth target may be sidetracked by lingering risks from Covid-19, including the emergence of more infectious variants like Omicron, which sent the number of cases surging this month.

Chanco, who was the least optimistic with a 2022 GDP growth forecast of only 4.5 per cent, said: “The government’s seven-to-nine per cent forecast for this year was already going to be a stretch, even before the Omicron outbreak erupted.

“As far as I can tell, the Philippines has enacted some of the toughest anti-Omicron restrictions in ASEAN, which will only serve to cement its status as one of the region’s economic underperformers.”



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