The inability to control the raging COVID-19 pandemic is projected to make economic recovery in the Philippines the most sluggish in Asia-Pacific even as growth will be among the fastest this year due to the low base coming from last year’s worst post-war recession, according to Moody’s Analytics.
“The lack of control of the pandemic, the inability to acquire vaccines, and the relative distance from export supply chains all factor into the outlook for the Philippines to be among the weakest in the region,” Moody’s Analytics chief Asia-Pacific economist Steven Cochrane said in a report titled “APAC Economic Outlook: Roll Out the Vaccines!”
“The Philippines is the laggard of the entire region as a record-high number of new COVID-19 cases has led to a resumption of strict lockdowns in Metro Manila, and the country faces a severe shortage of vaccines,” Cochrane said, referring to the recent strictest quarantine level imposed for two weeks in so-called National Capital Region (NCR) Plus, which accounts for half of the economy.
Dire situation
GDP fell by a record 9.6 percent last year due to the longest and most stringent COVID-19 quarantine in the region—ongoing to this day.
“The situation is also dire in the Philippines, which struggled to contain the virus last year, could not bring the caseload down appreciably, and now suffers under a new peak caseload,” Cochrane added.
While most Asia-Pacific economies would revert to prepandemic GDP levels by the middle of 2021, Cochrane said that “by the end of 2021, only Thailand, Malaysia and the Philippines will still be struggling to reach this point of their economic recovery.”
“There is much uncertainty about the outlook for the Philippines,” Cochrane said, adding that herd immunity may be achieved in 2023 even as many other countries in the region may do so by 2022.
Low base effects
In terms of gross domestic product (GDP) growth, the Philippines was projected to expand by 6.3 percent in 2021 and 7.1 percent in 2022—among the highest in the region, but below the government’s target range of 6.5 to 7.5 percent this year and 8-10 percent next year.
“Expected growth rates in India and the Philippines are also strong, but this is partly due to very low base effects, as they were the two hardest-hit economies last year because of their strict and lengthy economic shutdowns. Further, given the resurgence of new COVID-19 cases—record highs in both countries over the past month—India and the Philippines are at greatest risk of underperforming during the coming year,” Cochrane said.
It did not help that inflation was “running relatively high” in the Philippines and India, unlike most other countries in the Asia-Pacific region.
Moody’s Analytics projected inflation climbing to 6.2 percent this year and 4.4 percent next year.
The unemployment rate, meanwhile, was expected to gradually ease from a 15-year high of 10.3 percent last year to 7.8 percent in 2021 and 6.9 percent in 2022.
As for external trade, Cochrane said “the Philippines and Thailand are less dependent upon goods exports and, having seen little improvement in the pace of goods that they do export, will have to depend on the eventual opening of international travel and tourism and, in the case of the Philippines, service exports such as business processing and software services.”
Cochrane said economic acceleration in the US and recovery in Europe were expected to boost export trade before yearend. “The Philippines has a modest, roughly equal exposure to both export destinations and should see strengthened demand for its service exports.” INQ