Economists slash growth forecasts for PH

Economists are downgrading their economic growth forecasts for this year, and some of them even for next year, following the country’s disappointing first quarter output.

While consensus forecasts had expected the economy to remain in recession in the first quarter, the 4.2-percent year-on-year gross domestic product (GDP) decline was steeper than the expected 3.2-percent contraction. “We had previously estimated this year’s GDP growth rate at a relatively pessimistic 5 percent, which now looks rather high given unknown course of wild card mutant varieties and possible future on and off lockdowns. In the event, we cannot rule out a flat growth scenario. We will review our growth forecast in an upcoming outlook report,” economist Romeo Bernardo of New York-based Global Source, said in a research note dated May 11.

Fitch more pessimistic

London-based think tank Fitch Solutions downgraded its Philippine GDP forecast for this year to 5.3 percent from its earlier outlook of 5.8 percent. It also sees the country taking a long time to return to prepandemic growth trends.

“We have revised down our outlook for the following year as well, given our expectations for COVID-19 to continue to disrupt activity at least through the first half of 2022. We now forecast growth of 6.5 percent in 2022, down from 8.2 percent previously and expect economic output in nominal terms to stand 11.5 percent lower than its prepandemic trend level by 2025,” Fitch Solutions said in a research note dated May 12.

ING Philippines economist Nicholas Mapa said the country’s growth outlook remained relatively downbeat given the tighter lockdown that had been reimposed to curb surging COVID-19 cases.

The negative impact of the renewed lockdowns surfaced in the latest local manufacturing gauge, which showed a contraction in April after a three-month expansion streak, Mapa said.

“Recent lockdowns are also expected to weigh on the services sector the most as personal services are still not allowed to operate,” Mapa said.

Growth in Q2

“Although we still expect second quarter GDP to post growth year-on-year, we may have to trim our expectations especially if partial lockdowns are extended through May,” he said.

Global Source’s Bernardo said the reimposition of strict lockdown measures from the last week of March to date—with any lifting of restrictions this month likely to be done cautiously—implied a sequential decline in second quarter output, although the year-on-year growth clip would likely be high coming from a very low base last year.

He noted that economic managers—given their 6.5-7.5 percent target growth range for this year—were pinning their hopes on a major relaxation of quarantine policies through improving health resources and automating contact tracing, full implementation of available budgetary resources and acceleration of the vaccination program. But he said a major easing of quarantine would be difficult following the detection locally of the more transmissible “double mutant” COVID-19 variant first found in India.

Fiscal stimulus can help, but this may require additional budgetary action by Congress under the Bayanihan 3, he said.