HSBC: Without quicker mass vaccination, PH economic outlook is dim
MANILA, Philippines—Global banking giant HSBC sees the prolonged quarantine in the Philippines as a drag to economic growth in 2021 and could be aggravated by slow vaccination and high consumer prices.
HSBC’s chief Asean economist Joseph Incalcaterra told a press briefing on Tuesday (March 6) that he expected the Philippines’ gross domestic product (GDP) to grow 6.3 percent in 2021. HSBC’s forecast was below the government’s 6.5-7.5 percent growth target for 2021.
“We know from the experience of COVID-19 that when we have the type of lockdown measures which were recently imposed in large parts of the Philippines, it has a very clear negative impact on growth,” Incalcaterra said.
“So that forecast is still subject to downside risk,” he added, referring to the ongoing two-week enhanced community quarantine (ECQ) in the National Capital Region and four provinces, or NCR Plus, which accounts for at least half of the country’s GDP.
In 2020, GDP shrank by a record 9.5 percent—the Philippines’ worst post-war recession.
The country remained under the longest and most stringent quarantine in the region as COVID-19 cases continued to surge.
“The short-term outlook for the Philippines is quite challenging, with the priority is bringing the outbreak under control,” Incalcaterra said.
“What adds to some of the challenges for the Philippines is that, not only is the pace of vaccinations somewhat slow, but also there’s still not enough vaccination security to cover the entire population. So this is still very much a challenge,” he added.
If the Philippines can progress on mass vaccination for SARS Cov2, the virus that causes COVID-19, in the coming weeks and months, Incalcaterra said “it should eventually allow for a somewhat brighter outlook.”
On top of fighting COVID-19, Incalcaterra said supply-side constraints needed to be addressed to temper food inflation. Meat, especially pork, had turned expensive during recent months due to the African swine fever (ASF) scare as well as a string of strong typhoons toward the end of 2020 which damaged agricultural produce, especially vegetables and fruits.
Incalcaterra also urged “addressing the developmental impact of the crisis, particularly the increase in poverty that affects poor Filipinos—and that will likely require additional fiscal response.”
Estimates of the state-run think tank Philippine Institute for Development Studies (PIDS) showed that at least two more rounds of dole outs amounting to at least P163.4 billion would be needed to reduce the number of families and individuals who could slide back to poverty because of the pandemic.
“The good news with the Philippines is that the external fundamentals, when it comes to financial stability—those all look still relatively strong,” Incalcaterra said.
