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PH growth forecasts for 2021 scaled down

London-based think tank Fitch Solutions drastically lowered its economic growth outlook for the Philippines this year as the return to tough lockdown measures due to spiraling COVID-19 cases is seen to depress domestic activity in the near term.

Fitch Solutions now sees Philippine real gross domestic product (GDP) growing by 5.8 percent this year, down from the original forecast of 7.6 percent, with an expectation for a disrupted rollout of the government’s infrastructure spending drive.

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“The surge in COVID-19 cases in the Philippines in March and lockdown measures imposed reflect the continued risks to the archipelago’s economic outlook,” the think tank said in a research note dated April 1.

With the government struggling to contain the pandemic, the government has reimposed lockdown measures in Metro Manila and surrounding provinces covering an estimated 24 million people. Fitch Solutions expects the lockdown measures to be extended beyond two weeks given the continued surge in cases and the prolonged impact on hospital capacity.

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“The likelihood of further outbreaks in other regions remains high and given the slow vaccination rollout in the country (less than 1 percent of the population has been vaccinated as of end-March) we believe the Philippines’ recovery will continue to be hampered by the pandemic,” Fitch Solutions said.

Regional outlook

The think tank added that its revised forecast of 5.8 percent still had further downside risks.

It noted that its expectation for a modest recovery this year assumed that domestic demand would gradually recover and the government’s infrastructure plans would come to fruition, resulting in a sharp increase in domestic activity. “However, the slow vaccine rollout and recurrent difficulties in containing outbreaks look set to stall the recovery further,” it noted.

Results of a survey among economists in Asean-5 and India also showed a growth forecast of 5.2 percent for the Philippines, down from 5.9 percent during the previous poll last December.

The poll, conducted by the think tank Japan Center for Economic Research (JCER), said that while Asian countries that rolled out mass vaccination earlier such as India, Indonesia and Singapore saw their near-term economic prospects improve, slow inoculation tempered economists’ growth expectations for the Philippines, said on Monday.

Economists watching the Philippines projected GDP shrinking by a faster 3.8 percent year-on-year in the first quarter from the 0.7-percent decline a year ago. Base effects from last year’s trough would allow GDP to grow by 8.4 percent year-on-year during the second quarter, 5.6 percent in the third quarter, and 4.5 percent during the fourth quarter.

Joining the Philippines with lower growth estimates for 2021 were Malaysia and Thailand.

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“Most economists see the rollout of COVID-19 vaccination as one of the most significant positive developments over the last three months and all three upward-trending countries have rolled out vaccinations relatively sooner. This may have improved economists’ outlooks. Delays in vaccination and the spread of COVID-19 variants are listed as factors that might damage the economies,” JCER said.

Top concerns

In the Philippines, the faster spread of COVID-19 variants and delayed vaccination or “corona shock” were identified as top economic concerns, but higher inflation was also seen as another main risk to recovery from the pandemic-induced recession.

Economists see headline inflation averaging 4.5 percent year-on-year in the first quarter, 4.8 percent during the second quarter, 4.7 percent in the third quarter and 4.2 percent during the fourth quarter, to average 4.5 percent in 2021, above the target range of 2-4 percent.

Singapore was expected to lead economic growth in Asean-5 this year with 6.1-percent expansion, followed by Malaysia’s 5.3 percent and then the Philippines. India will grow by a faster 11.2 percent in 2021, according to JCER’s survey.

For 2022, economists projected an average GDP growth of 6 percent for the Philippines, better than last December’s forecast of 5.8 percent but still below the government’s goal. INQ

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TAGS: Business, Fitch Solutions
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