The return to strict lockdown protocols in the second quarter, delayed COVID-19 vaccines rollout and muted demand recovery will likely curb the country’s economic growth to just 4 percent this year, New York-based think tank Global Source said.
In a research note dated May 28, written by economists Romeo Bernardo and Marie Christine Tang, Global Source downgraded its 2021 gross domestic product (GDP) growth forecast from 5.5 percent. But the think tank upgraded its GDP 2022 growth forecast to 6.5 percent from 5 percent.
Global Source’s economic outlook for this year is less optimistic than the consensus forecast growth of 6.1 percent, which has likewise been downgraded from 7.3 percent.
For next year, consensus forecast has also been upgraded to 7.1 percent from 6.7 percent.
“Although restrictions have been eased since mid-May, a vigorous climb up will not be possible without wider vaccination to build up consumer confidence. But while the race to quickly vaccinate as many as possible has begun, the effort is hobbled by vaccine supply uncertainty, logistics and roll out learning curve and high level of vaccine hesitancy,” Global Source said.
“Meanwhile, another snake head may just be around the corner given more transmissible virus mutants and the Philippine’s inability to completely close off borders due to its many overseas workers. Plus, with presidential elections only a year away and no clarity on the slate of possible candidates, uncertainties are all around,” it added.
Global Source said tracking the progress of the economy during the pandemic was like watching a game of Snakes and Ladders. After climbing a few rungs since third quarter of last year, economic recovery was stalled by rising infections, which triggered the reimposition of strict lockdown measures in Greater Metro Manila.
“With less than a year to go before the national elections, the Duterte administration is faced with the problem of an economy scarred by the pandemic that is unable to sustain the uphill climb,” the research said.
The disappointing first quarter turnout pointed to the limits of tweaking supply-side restrictions on activity when a large swathe of the population has suffered income loss and is unable to find work, Global Source noted.
Moreover, Global Source said the need to reimpose tough quarantine measures suggested that a more aggressive relaxation of restrictions would be unwise in the face of more transmissible virus mutants, limiting prospects for business recovery and increasing the likelihood of more bankruptcies.
For the second quarter, Global Source expects economic activity to shrink compared to the first quarter due to the stricter lockdown through mid-May, with nonessential travel and business operations curtailed.
“However, compared with last year’s quarantine, losses are not expected to be as large because of the smarter way the lockdown was carried out this year (no suspension of public transportation and essential construction works, less heavy-handed enforcement). Also, unlike last year when most of the world went into synchronous lockdowns, the local economy this time is benefiting from recovering demand in trading partner economies (such as electronics goods and business process outsourcing services) as well as remittance inflows especially from countries with large stimulus packages,” Global Source said.
A stronger post-lockdown recovery from mid-May onward is expected with the impetus from intensified vaccine roll-out and the deliveries of more western vaccines that may help to overcome vaccine hesitancy, the think tank said.