The Organization for Economic Cooperation and Development (OECD) expects the Philippines to post a slower-than-targeted economic growth of 5.9 percent in 2021 following a record recession last year.
The OECD’s growth forecast in its Economic Outlook for Southeast Asia, China and India 2021 report released on Thursday was below the projection of 6.2 percent it made in November last year as well as the government’s 6.5-7.5 percent goal.
The OECD, an association of 37 high-income nations, earlier projected real gross domestic product (GDP) in the Philippines to have fallen by 9 percent in 2020. Government data showed actual contraction was at 9.5 percent—the worst post-war and the fastest drop in the Association of Southeast Asian Nations (Asean).
“Public investment and net exports are expected to support a partial economic recovery in 2021 (of 5.9-percent growth), although rising debt costs, declining remittances and the capacity of the government to service debt remain major downside risks to the outlook,” the OECD said.
It did not help that “while the lockdown measures imposed in the Philippines appear to be the strictest in the Asean region, latest data suggest that the virus continues to spread in the country, albeit at a slower pace.”
Based on the OECD’s estimates, the total amount of fiscal package put in place by the Philippines to fight the health and socioeconomic ills inflicted by COVID-19 stood at 3.5 percent of GDP, eclipsed in the region by Singapore’s 14.4 percent, Thailand’s 8.6 percent, Malaysia’s 6.9 percent, Vietnam’s 5.3 percent, and Indonesia’s 3.8 percent.
The OECD enjoined the Philippines to take advantage of digitalization to quickly bounce back from last year’s slump.
“Use of digital technologies in the Philippines has increased during the COVID-19 crisis, helping individuals, businesses and the government to cope with physical distancing measures. Around 17 percent of Philippine companies with digital transformation projects reported that the crisis pushed them to start implementing the projects,” the OECD said, citing a Grant Thornton report.
But the OECD said “technology adoption in the manufacturing sector is relatively slower than in the services sector,” which included the information technology and business process outsourcing (BPO) industry—the second biggest globally next to India’s and one of the Philippines’ largest dollar earners.
“BPO firms in the Philippines are shifting toward more specialized BPOs, such as cover-fraud analytics, data integration, project management, R&D (research and development), merger and acquisitions valuation and product profitability analysis,” OECD said. Skills upgrading was paramount, it added.
Citing an International Telecommunication Union report, the OECD also lamented the Philippines trailed far behind other emerging Asian economies in digital connectivity, with only 17.7 percent of homes connected to the internet in 2019.