The economy will likely continue to shrink in the first quarter of the year but at a much slower pace compared to the levels last year, and a turnaround in the subsequent quarters will lead to a full-year growth of 6.5 to 7.5 percent.
This was according to Barcelona-based FocusEconomics and Bank of the Philippine Islands lead economist Emilio Neri Jr.
Citing consensus forecast of 30 economic analysts, FocusEconomics said the country’s gross domestic product (GDP) would likely contract by 1.3 percent in the first quarter of the year. Neri, for his part, expects the first-quarter GDP to decline by 2 percent.
Coming from a low base, the second-quarter GDP is expected to post a double-digit growth of 15.1 percent year-on-year, according to FocusEconomics.
Full recovery in 2022
Last year, the GDP shrank by 0.7 percent year-on-year in the first quarter, a record 16.9 percent in the second quarter, 11.4 percent in the third quarter, and 8.3 percent in the fourth quarter—or a 9.5-percent full-year drop. This dragged the country to its first recession since the Asian financial crisis in 1998 and its worst post-war recession. In the third and fourth quarters, FocusEconomics said the economy was expected to grow by 8.5 percent and 5.6 percent, respectively.
Although Neri sees the partial recovery of the country’s 2019 output this year, he said “we will only be able to fully recover sometime in the latter part of 2022.”
He said the trajectory toward economic recovery would still be V-shaped, albeit an asymmetric one, wherein the decline was much faster than the recovery.
Meaningful stimulus
“We are expecting a 6.8-percent GDP growth for 2021, based on our assumptions that the vaccine rollout will be able to cover no less than one-fourth of the population by the end of 2021, that the stimulus is meaningful enough, and that mobility will be on a sustained uptrend,” Neri said.
The first indicator of economic improvement is mobility, just as production responds positively to the easing of quarantine measures, Neri said.
“For groceries and pharmacies, in particular, the Philippines has gone a long way. From a drop in mobility of about 62 percent, we actually saw mobility in groceries and pharmacies exceed prepandemic levels in December 2020. That’s how confident Filipinos became during that month. We saw a little bit of decline in January, but in February, people started to move around again. Now, it is just down 6 percent compared to prepandemic levels,” he said. On its website, FocusEconomics said its panelists projected a 7.1-percent growth for the entire 2021.
“The Philippines’ economy is expected to bounce back and expand solidly in 2021—at one of the fastest rates in the region—on recovering foreign demand and returning household consumption and fixed investment,” FocusEconomics said.
FocusEconomics’ consensus forecast shows a 12.9-percent jump in exports this year to reverse last year’s 16.8-percent decline.
Domestic demand was seen growing 8.5 percent in 2021 from the 12.4-percent drop in 2020, while fixed investment would increase by 11.8 percent this year after sliding by 27.5 percent last year.
Sought for comment, Acting Socioeconomic Planning Secretary Karl Kendrick Chua said FocusEconomics’ forecast of sharp economic growth during the second quarter following minimal contraction in the first quarter was “likely.”
Finance Undersecretary Gil Beltran agreed that the projections were “possible, given the low base.”
Beltran said the vaccination rollout which started this month would allow GDP to grow by at least 6.5 percent.
When the Cabinet-level Development Budget Coordination Committee (DBCC) projected the 2021 GDP in December, it took into consideration a prolonged COVID-19 quarantine spilling over to the first few months of this year while awaiting vaccines to arrive.
Beltran said that in their target range, the 6.5-percent growth estimate had a scenario of “slower vaccination rollout,” while the most optimistic end of 7.5 percent would be achieved with “speedier” mass inoculation.
In a report Thursday, Moody’s Analytics chief Asia-Pacific economist Steven Cochrane said that “for countries where containment of COVID-19 has been less successful—Indonesia, Malaysia and the Philippines, for example—a rapid rollout was essential to opening their economies and bringing the service industries back to life while protecting public health.”