Duterte’s economic managers scale down 2021 growth goal to 6-7%
MANILA, Philippines — Amid the lingering threat of newer, more contagious COVID-19 variants and the recent most stringent lockdown reimposed in areas accounting for half of the economy, President Rodrigo Duterte’s economic managers have turned less bullish in the Philippines’ growth prospects, downscaling their target range to 6-7 percent from 6.5-7.5 percent previously.
But not everything’s doom and gloom — economic recovery in countries opening up from lockdowns following speedy mass vaccination would jack up the Philippines’ exports, while the economic team also pushed localized quarantine restrictions moving forward to gradually reopen the domestic economy and enjoin consumption.
After their meeting Tuesday, Socioeconomic Planning Secretary Karl Kendrick Chua told a press conference that there would be “chances of sporadic lockdowns” up to next year, but the government was working to keep quarantines “risk-determined.”
“We do not see the need for big-area lockdowns — we’ll proceed to limit lockdowns to local or sectoral levels,” said Chua, who heads the state planning agency National Economic and Development Authority (Neda).
Budget Secretary Wendel Avisado, who chairs the Cabinet-level Development Budget Coordination Committee (DBCC), said the 2022 growth outlook was also tempered to 7-9 percent from 8-10 percent when they previously set medium-term macroeconomic targets in December last year.
Avisado attributed the lower growth goal for 2021 to the “emergence of new COVID-19 variants and the reimposition of enhanced community quarantine (ECQ) in the National Capital Region (NCR) Plus area during the second quarter of the year.” He was referring to Metro Manila as well as the provinces of Bulacan, Cavite, Laguna, and Rizal, which reverted to the most stringent lockdown level for two weeks after COVID-19 infections surged.
Chua said gross domestic product (GDP) needed to grow by an average of 10 percent from the second to fourth quarters to achieve 6-7 percent full-year expansion. To recall, GDP shrank by a worse-than-expected 4.2 percent year-on-year during the first quarter, extending the Philippines’ recession to five straight quarters — the longest since the Marcos-era foreign debt crisis in the early 1980s. Last year, GDP shrank by 9.6 percent — the worst post-war outturn.
Avisado said the economic rebound was attainable if COVID-19 will be contained through the prevent, detect, isolate, treat and recover strategy, especially where the risk was highest like NCR Plus, Pampanga as well as the cities of Cebu and Davao. “By targeting these areas, COVID-19 transmission can be dramatically reduced throughout the country,” the Budget chief said.
For his part, Chua said the speed of the nationwide mass vaccination would also play a key role in reverting to economic growth. The government targets to inoculate all adults nationwide by yearend to achieve herd immunity, while it was also looking for up to P75 billion in funds to possibly vaccinate teenagers and to buy booster shots for next year.
On top of faster virus detection and isolation plus vaccination, Avisado said the government was looking to shell out P170 billion in “supplemental social support for those hardest hit by the pandemic as well as to fund improved health protocols.”
“A version of this proposal is currently being deliberated in the Lower House, and is contingent on raising additional savings and revenues to remain deficit-neutral,” Avisado said.
The bigger expenditures for the COVID-19 response, which included vaccine purchases, will bloat the budget deficit to a larger P1.86 trillion or 9.4 percent of GDP. The DBCC earlier programmed the 2021 fiscal deficit at P1.78 trillion or 8.9 percent of GDP — in the middle of the pack among the Philippines’ Asean neighbors and similarly rated investment-grade economies.
The DBCC jacked up this year’s spending program to P4.74 trillion from P4.66 trillion previously, while the tax and non-tax revenue target was kept at P2.88 trillion.
Despite a wider budget-deficit program entailing borrowings to finance spending on goods and services, Finance Secretary Carlos Dominguez III said the share of increasing debt to economic output would remain below 60 percent by this year’s end. In the first quarter, the record-high debt level coupled with economic contraction saw debt-to-GDP — a metric which credit-rating agencies watch as this reflected an economy’s capacity to settle obligations — reached 60.4 percent or above what debt watchers considered as manageable.
Dominguez nonetheless said some of the additional expenditure items that widened the programmed deficit were already financed, including the P62 billion in loans for COVID-19 vaccines obtained from three multilateral banks.
Duterte’s chief economic manager Dominguez said austerity measures in the government, upcoming sale of some mining assets upon conclusion of their valuation amid a spike in copper prices, as well as the planned higher dividend remittances from state-run corporations would help shore up revenues.
Prospects for the country’s export sector were also rosier as the DBCC projected shipments of Philippine-made goods to overseas growing by a faster 8 percent this year compared to the earlier projection of 5-percent expansion.
The Philippines’ merchandise exports last year shrank 10.1 percent to $63.77 billion, a narrower decline compared to the government’s expectations of a 16-percent drop.
Dominguez said foreign trade was expected to bounce back with the Philippines’ top trading partners such as China, the United States, the European Union, and Japan.
“There is a large shortage of practically everything in the world today — that is an opportunity for us to fill,” Dominguez said.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Francisco Dakila said the expected continued strong demand for electronic goods would bolster sales of semiconductor and electronics — the Philippines’ top export commodity.
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