UK think tank: Without coronavirus vaccine in sight, PH economy seen to worsen

MANILA, Philippines—With a coronavirus vaccine seen available only by middle of 2021, Philippine economic recovery would be slow and likely to return to pre-pandemic levels only in 2022, UK-based Oxford Economics said.

Makoto Tsuchiya, the think tank’s Philippine economist, said while economic recovery had been expected following a 16.5 percent contraction in the second quarter of 2020, “monthly indicators have bounced” from low levels in April.

“We believe the pace of recovery will be relatively modest and look for year-on-year GDP growth to stay negative during the rest of 2020,” Tsuchiya said in an e-mail on Wednesday (Oct. 15).

Tsuchiya said Oxford Economics further downgraded its latest 2020 GDP forecast for the Philippines to a bigger 8.9-percent contraction from 8.2 percent previously, both worse than the government’s estimate of 4.5-6.6 percent decline.

While quarantine restrictions have been gradually eased, “workplace mobility remains far below normal,” Tsuchiya said in a separate Sept. 29 report.

“In addition, we now think that major global medical advances against COVID-19 will only be widely realized in mid-2021,” Tsuchiya said.

“This will mean a more prolonged period of social distancing measures, thereby hindering the recoveries in both domestic and global demand,” Tsuchiya added.

“We expect the improvement in private consumption, the largest component of GDP, will be hampered by subdued remittances and a double-digit unemployment rate,” the economist said.

“Meanwhile, we expect private investment to remain very sluggish given gloomy sentiment amid high uncertainty and lower corporate profitability,” Tsuchiya added.

But Tsuchiya said “the passing of the delayed second fiscal package should start to shore up domestic demand in late 2020 and early 2021,” referring to the P165-billion Bayanihan to Recover as One or Bayanihan 2 law.

The 2021 growth projection was also scaled down to 8.3-percent expansion from the previously rosier forecast of 10.3 percent.

With a sharper GDP drop this year and a slower recovery next year, Tsuchiya said the Philippine economy “will not regain its pre-pandemic size until 2022.”

The Philippines’ GDP stood at P19.5 trillion last year, and had been projected by the government to decline to P18.9 trillion in 2020 no thanks to pandemic-induced recession.

TSB